2007 General Assembly Adjourns

Legislative Wrap-Up

The General Assembly adjourned its 2007 Regular Session on Thursday, August 2.  In the final few days of the session, the legislature passed Medicaid relief for counties, restored municipal growth to the “sales tax swap” in the budget, enacted new landfill regulations with accompanying statewide tip fee, and passed new rules on interbasin transfers.

When the dust settled, there were some disappointments, but the League had also accomplished several of its major legislative priorities for the session.  Of particular note are new authority for cities and towns to deal with substandard nonresidential buildings and new authority to set up special trusts to handle non-pension benefits for municipal retirees, a cost-savings measure.

Over 3,600 bills were introduced during the 2007 session—a record number.  The League monitored over 1,100 of them and 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 Joe Hackney 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 special recognition to those who sponsored or provided special assistance on legislation of interest to municipalities.

 The following are highlights of the state budget and of actions taken on priority municipal issues by 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 and legislative calendars are available on the internet at http://www.ncleg.net .  Please feel free to contact the League staff if you have any particular interest or concern regarding any piece of legislation.

Note on Status of Legislation

 Throughout this Legislative Bulletin , legislation that has become law is delineated with its session law chapter number after the bill title (e.g. SL 2007-1).  Even though these acts have become law, some have delayed effective dates, so always check the legislation itself.

 Some bills mentioned below were 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.

2007 Budget Overview

 After many weeks of negotiation, the General Assembly passed the state budget on July 30, and Governor Easley signed it into law on July 31.  HB 1473 - 2007 Appropriations Act (SL 2007-323) approves a $20.7 billion budget for the FY 2007-09 biennium. 

 The big news in the budget, of course, was the Medicaid relief package and “sales tax swap” that was used to accomplish it.  With passage of the state budget, the General Assembly adopted a phased-in take over of the county share of Medicaid expenses.  As the state assumes county Medicaid expenses, it will, in turn, take over a portion of the local option sales tax revenues.

 The last one-half cent local option sales tax--Article 44--is the affected tax.  The state will take over one-half of this tax (that is, one-quarter cent) effective October 1, 2008 and take over the remaining one-quarter cent effective October 1, 2009.  Municipalities currently receive a share of the proceeds from the Article 44 sales tax and will be reimbursed for the loss of those revenues.  The method of replacement includes a growth factor.  The first one-quarter cent lost will be replaced by a payment equal to one-half of what each municipality receives from the Article 40 local sales tax.  The Article 40 tax is a one-half cent tax distributed back to the county level on a per capita basis, so the first hold harmless, which begins October 1, 2008, is equal to half of this one-half cent – in other words, a quarter-cent, just like what is being taken away.  Since there is growth in the Article 40 tax proceeds, there will be growth in the hold harmless payments.

 Effective October 1, 2009, municipalities will receive a second hold harmless payment equal to one-quarter of the one-cent Article 39 local sales tax.  This is a tax distributed back to the county area on point of delivery, just like the tax being taken over by the state.  Again, the hold harmless payment is tied to the amount received from an existing revenue source so any growth will be included.

 The money for the hold harmless payments to cities comes from the counties' share of sales tax revenues.  The NC Department of Revenue will make both hold harmless payments directly to cities, and there is no expiration date on this hold harmless.

 In a related measure, the state budget changed the Article 42 local option sales tax from per capita to point of delivery distribution, which will affect the total amount of tax proceeds returned to each county area for distribution among the county and the municipalities in that county.  [This change does not affect the method that counties choose to distribute tax proceeds among the county and its municipalities – either per capita or ad valorem.]

 All of these changes were adopted in the final days of the session, and we are still working with the staff of the General Assembly on detailed information about implementation.  Section 14.4 of HB 714 – 2007 Budget Technical Corrections Act (SL 2007-345) partially corrects an error in the budget bill concerning the calculation of the municipal hold harmless amount for the impact of the change in distribution of the Article 42 local sales tax from a per capita basis to point of delivery.  We are working with General Assembly staff on a further technical correction for the short session that will fully hold cities and towns harmless.

The General Assembly also gave counties authority to levy either a new one-quarter cent sales tax or a 0.4 percent land transfer tax, subject to voter approval.  Discussions mentioned using the new tax to pay for school construction, but use of the proceeds is not restricted.  The General Assembly did not require counties to share proceeds of the new tax with municipalities, despite significant and growing municipal infrastructure needs, including roads, stormwater, water and sewer and others.

Although we are disappointed that our efforts to obtain a municipal share of the new revenue sources were not successful, we express our appreciation to House Speaker Joe Hackney, Reps. Bill Owens, Paul Luebke, Lucy Allen, Beverly Earle and Deborah Ross, and Sen. Dan Clodfelter for trying to help us secure a designated share for municipalities.  We also appreciate Sen. Tony Rand and the other Senate and House leaders for protecting our growth in the sales tax hold harmless.

Other items of interest in the budget bill are mentioned under subject categories below. 

Alcoholic Beverage Control

Modifications were made to several statutes relating to alcoholic beverages.  HB 267 – ABC Law Changes (SL 2007-402) allows the ABC Commission to issue off-premises malt beverage and unfortified wine permits to establishments located in any incorporated municipality that has voted to permit the sale of mixed beverages.  The ABC election law was amended in SB 661 – ABC Election – Cities in Two Counties (SL 2007-386) to allow a city located in two or more counties to hold a mixed beverage election if the city has at least 500 voters and a municipality in either county in which the city is located operates an ABC store.

Annexation

 More than two dozen bills were introduced to restrict, modify or eliminate authority for city-initiated annexations.  A few were local bills requiring referenda or prohibiting cross-county annexations in specific counties; most were statewide bills requiring referenda with a favorable vote by residents proposed for annexation or changing the service requirements or development criteria:  HB 32, HB 56, HB 60, HB 86, HB 87, HB 104, HB 243, HB 315, HB 378, HB 379, HB 457, HB 549, HB 741, HB 921, HB 1495, HB 1608, HB 1893, HB 1958, SB 214, SB 255, SB 479, SB 571, SB 572, SB 647, SB 650.

In June, a subcommittee of House Rules held a hearing on one of the bills, HB 86 – Study Municipal Annexation .  More than 200 showed up for the late afternoon hearing, with annexation opponents citing violations in the current law and asking legislators to limit or end city-initiated annexations.

The General Assembly did not enact the annexation study, nor any of the other annexation-related bills.  As far as the League staff can determine, these bills are not eligible for consideration in the 2008 session.  However, a nnexation remains a volatile and divisive issue that we will see again.  We urge you to continue discussions with your legislators and others regarding the importance of annexation to your city or town.

Elections

A number of bills affecting election laws were considered by the General Assembly.  HB 1743 – Election Amendments (SL 2007-391) is an omnibus bill that makes numerous changes to the election laws.  Among those is a new provision requiring that the results of all municipal elections be reported to the State Board of Elections within 30 days of the certification of the election.  HB 1517 – Voter-Owned Elections Pilot establishes a pilot program to provide certain candidates for council of state offices with the option of financing their campaigns from a publicly supported fund.  The act applies to elections for Auditor, Superintendent of Public Instruction, and Commissioner of Insurance in 2008 and thereafter.  Under HB 91 – Registration and Voting at One-Stop Sites (SL 2007-253) an individual may now register in person and then vote at a one-stop voting site in the person's county of residence during the period for one-stop voting.  SB 1218 – Candidate Felony Disclosure (SL 2007-369) requires a candidate (including a candidate for municipal office) to file with the notice of candidacy a statement as to whether he or she has ever been convicted of a felony.  If so, the candidate must name the offense, the date of conviction, the date of restoration of citizenship rights, and the county and state of conviction.  A conviction need not be disclosed if it was dismissed as a result of reversal on appeal or resulted in a pardon of innocence or expungement.  The disclosure is to be available as a public record in the office of the board of elections.  The act becomes effective January 1, 2008.

Environment

Grants— SB 1468 – Promote Innovative Water Protection Efforts allows the Clean Water Management Trust Fund to finance innovative efforts, including pilot projects, to improve stormwater management, to reduce pollutants entering the state's waterways, to improve water quality, and to research alternative solutions to the state's water quality problems.  HB 1370 – Clean Water Grants (SL 2007-185) specifies that a Clean Water Management Trust Fund planning grant or technical assistance grant for a regional wastewater collection system or regional wastewater treatment works is not subject to the high-unit-cost threshold.

Interbasin Transfer— Legislation to revise the state's approval process for the transfer of surface water between river basins was ratified in the waning hours of the session .  HB 820 – Amend Interbasin Transfer Laws began as a bill on an entirely different subject.  Once it passed the House, the text was replaced by the Senate with substantive provisions on interbasin transfer that had previously been approved in Senate committee.  The House refused to concur in the changes and a conference committee worked out the final version.  A number of municipalities had positions on the issue, both pro and con, and the League's Board of Directors, acting on a recommendation from a League legislative action committee, asked for additional study so that more cities could reach middle ground.

The enacted bill removed some of the proposed changes to interbasin transfer, instead calling for a study of the broader issue of the state's water policy.  The bill directs the Environmental Review Commission to undertake this study, but also establishes a new process for applying for interbasin transfer and for determining whether the transfer should be approved.  Some of the new aspects of the process are increased notice and public hearing requirements; a full environmental impact statement and a public hearing on the EIS; mediation to initiate settlement discussions among interested parties; and preparation of a draft determination by the Environmental Management Commission with a public hearing on the draft

 In making its final determination on the petition for transfer, the EMC must consider the necessity and reasonableness of the amount of surface water proposed to be transferred and its proposed uses and find that there are no reasonable alternatives to the proposed transfer.  The certificate of transfer must include a prohibition on resale of transferred water except under certain conditions.  The legislation states the policy that the projected future needs of the receiving river basin are subordinate to those of the source river basin.  Section 43.7C of SB 613 – 2007 Technical Corrections Act amends the effective date to provide that the bill will apply to any petition for an interbasin transfer certificate for which preparation of an environmental assessment or an environmental impact statement has begun on or after the date the act becomes law.

Interconnection— Legislation allowing DENR to require the interconnection of water systems and the EMC to require the interconnection of sewer systems was introduced but not debated this year.  SB 541 - Interconnection of Public Water Systems would also have required analysis of reasonable alternatives before construction or alteration of systems.  It remained in Senate Agriculture and Environment, but fees were added so that the bill remains eligible for further consideration in 2008.

Nutrient Offset— Legislation to implement consultant recommendations on the appropriate amount of nutrient offset payments in the Neuse and Tar-Pamlico river basins passed as HB 859 – Nutrient Offset Program Transition.  The bill establishes nutrient offset fees of $28.35 per pound of nitrogen in the Neuse basin, $21.67 per pound of nitrogen in the Tar-Pamlico basin, and $28.62 per tenth of a pound of phosphorus in the Tar-Pamlico basin.  It requires DENR to implement a plan to transition the NC Ecosystem Enhancement Program nutrient offset program from fee-based to one based on the actual costs of providing nutrient credits.  The provisions are effective September 1, 2007, with the fee schedule to expire September 1, 2009.

Slope Construction — Legislation affecting nineteen counties in the western part of the state was discussed in committee but did not advance.  HB 1756 – Safe Artificial Slope Construction Act would have required counties to adopt ordinances regulating site planning, design, and construction with regard to any land-disturbing activity that creates or changes a slope.  Legislators indicated their intention to turn the bill into a study.

Solid Waste — In one of its last acts of the session, the General Assembly passed two bills to make sweeping changes to the way that landfills are regulated.  SB 1492 - Solid Waste Management Act of 2007 and SB 6 – Amend Solid Waste Management Act of 2007 together add a $2-per-ton statewide “tipping fee,” among other things.  This tax goes into effect July 1, 2008 and will be charged on municipal solid waste and construction and demolition debris that is deposited in a landfill in the state or transferred at a transfer station for disposal outside the state.  Proceeds of the new tax are distributed as follows: 50% to the Inactive Hazardous Sites Cleanup Fund to help pay for cleanup of pre-1983 landfills (many of which were old city or county dumps), 18.75% to cities for solid waste management programs and services, 18.75% to counties for solid waste management programs and services, and 12.5% to the Solid Waste Management Trust Fund.  Unfortunately, proceeds of the tipping tax will first be used to pay costs of the private firms that were in the planning stages of major landfills and were stopped by this legislation, so tax revenue may not be available for distribution to local governments or remediation of old landfills for some time after the tax goes into effect.

 The legislation imposes new landfill technical standards, such as a liner requirement for construction and demolition landfills and provisions on leachate collection systems.  The legislation increases to 200 feet the distance that new landfills must be set back from perennial streams or wetlands, and prevents construction of a landfill within five miles of a national wildlife refuge, two miles of a state park or one mile of state gameland.  The legislation also requires computer manufacturers that sell more than 1,000 pieces of equipment a year in the state to develop a plan to reuse, take back or recycle discarded computer equipment.  The League opposed the tip tax, but when its passage became likely, successfully worked to include liability protection for local governments for assessment and remediation of old unlined dump sites and to get a larger share of the proceeds distributed to cities.  The League also helped get provisions to grandfather existing facilities, preserve the use of an alternate test for local governments to comply with financial assurance provisions, clarify environmental compliance review requirements, and remove a double-liner requirement for municipal solid waste landfills.

Stormwater— A provision of the budget bill, HB 1473 (SL 2007-323) , states new requirements for paved parking areas.  Section 6.22 provides that any area designed for use as a vehicle parking area, except for covered or multilevel vehicle parking areas, cannot exceed 80% built-upon area.  The remaining portion of the vehicle parking area must meet design requirements for a permeable pavement system under DENR guidance documents, or other design requirements for stormwater management approved by DENR such as the use of grass or bioretention ponds.  It directs the Environmental Review Commission to study issues related to the use of pervious surfaces for vehicle parking areas.  It is effective as to any area designed to be used for vehicular parking for which an application for a building permit, a request for a zoning reclassification, or a subdivision plat is filed in the county or city in which the area is located on or after October 1, 2008.  

Wastewater Fees— Section 30.3(a) of the budget bill, HB 1473 (SL 2007-323) , increased state fees for NPDES permits, water quality certifications, sewer system extensions, and other wastewater permits by 20%.  The increases were effective August 1, 2007.

Finance & Taxation

Several pieces of legislation of importance to local government in the area of Finance and Taxation were acted upon this session.

911 Charges —The system for charging telephone customers for 911 services was overhauled this session.  Currently, wireless enhanced 911 is administered by the state Wireless 911 Board and wireline enhanced 911 is administered by local governments for their jurisdictions.  Effective January 1, 2008, HB 1755 – Coordinate Statewide Enhanced 911 System (SL 2007-383) consolidates the administration of 911 charges under a single state 911 Board.  It standardizes all e-911 monthly service charges--both wireline and wireless--at 70 cents, or a lower amount set by the 911 Board.  Charges will apply to each active voice communications service connection capable of accessing the 911 system, including VoIP.  Proceeds are to be placed in a new 911 Fund, to be allocated for monthly distributions to primary public safety answering points (PSAPs), for PSAP grants, and for reimbursement of commercial mobile radio service (CMRS) providers.  The bill holds each PSAP harmless as to e-911 revenues at FY 2006-07 levels.  Distribution to PSAPs is calculated as a base amount (the amount the PSAP received in FY 2006-07) plus a per capita amount.  Use of these funds is expanded to include in-state training of 911 personnel.  Any wireline fund balance that exists prior to the bill's effective date is transferred to the local government's general fund, to be used for any lawful purpose.  The bill expressly notes that revenues in the 911 Fund are not state expenditures under the state constitution and may not be withheld or reduced by the Governor. 

 Cable/PEG Channels— Section 28 of SB 540 – Revenue Laws Technical Changes resolves a problem under the current video programming statute (G.S. 105-164.44I) of local governments not having a mechanism to correct errors in their March 15, 2007 certification of cable television revenues. Such corrections are most likely to come to light through audits that could not be completed by the due date for submitting the information.  Under SB 540 , if a city or county determines that the amount of cable franchise tax it imposed during the first six months of FY 2006-07 differs from the amount certified to the Secretary of Revenue, the city or county may submit a new certification revising the amount.  Revised certifications must be submitted on or before April 1, 2008 to adjust the local government's base amount.  Since the future distributions of video programming revenues to cities and counties are initially based on these certified amounts, ensuring that they are accurate means a fairer allocation of funds to all.  SB 1068 - E-NC Internet Connectivity/PEG Channel passed the Senate and was in the House Appropriations Committee at the end of the session.  The current version of the bill removes the sunset on the e-NC Authority and increases the distribution to local governments of the sales tax on telecommunications and video programming services for PEG channel support.  The League will continue to support the bill in the short session.

Economic Development — It was a relatively quiet session for economic development.  The budget bill, HB 1473 (SL 2007-323) , appropriates $45 million in community development block grants for housing, economic development, and community revitalization.  The budget also establishes the NC Green Business Fund in the Department of Commerce to make grants to local governments, state agencies, nonprofits, and small businesses to encourage the expansion of small to medium size businesses to help grow a green economy in the state.  The fund is to focus on the biofuels industry, the green building industry, and environmentally conscious clean technology and renewable energy products.

 Some of the other legislation that was ratified included HB 1595 – Economic Development Modifications to correct some errors in how Urban Progress Zones are drawn, making the designation of zones more consistent with local zoning for non-residential tracts.  It also requires local economic development incentive agreements to include a “clawback” of any local funds from a private enterprise if the business fails to meet the job or investment goals in the incentive agreement.  SB 1196 – Modifications to Project Development Financing (SL 2007-395) made minor amendments to the requirements for base property values and broadened the uses of tax increment financing/project development financing.  HB 1761 – Job Maintenance and Capital Development Fund was created to provide incentives for companies with 2,000 or more employees that are expected to invest more than $200 million over the next five years.  The annual appropriation was set at $3.5 million for up to 10 years.

 Some bills of interest that were not enacted include:   HB 1663 – Confidentiality Agreements Void which would have prohibited local elected officials from signing agreements that would prevent them from discussing or disclosing information about specific economic development projects.  It was thoroughly debated in the House but was re-referred to House Commerce.  SB 91 – Endangered Manufacturing and Jobs Act would provide a variety of tax exemptions and eligibility for economic development grants for textile and furniture manufacturing, regardless of the economic “tier” of the county where the manufacturer is located.  The earlier iterations of the bill included a property tax exemption that the League opposed.  That provision was removed before the bill passed in the Senate, and we appreciate Sen. Jim Jacumin, bill sponsor, for responding to our concerns.  The bill remains eligible in the 2008 session.  HB 734 – Urban Area Revitalization Made Uniform would remove the population threshold of 150,000 to qualify for the urban revitalization projects and special financing authorities in municipal service districts.  The bill passed the House and is eligible for consideration in the short session.

Exactions/Fee Authority— Legislation that would have the effect of prohibiting cities from imposing regulatory fees passed the Senate towards the end of the session.  SB 1180 – No Monetary Exaction for Development would prohibit a city or county from imposing or exacting a tax, fee, or monetary contribution for development, a development permit, or a development agreement, unless “specifically authorized by law.”  The North Carolina courts have recognized city authority to charge regulatory fees by applying the broad interpretation provisions of G.S. 160A-4, but such fees are not specifically authorized by statute.  This bill would have an extremely detrimental effect on municipal planning departments that use fees to offset the costs of their regulatory programs.  The League's core principles state that municipal grants of authority should be broadly construed to include supplemental powers reasonably necessary to carry out the municipal functions, as the courts have recognized.  The bill remained in the House Finance Committee at adjournment but is eligible in the short session.  A related bill, SB 1152 – Interest on Illegally Levied Exactions (SL 2007-371), was enacted.  It provides that if a local government is found to have illegally exacted a tax, fee, or monetary contribution for development that is not specifically authorized by law, the local government must return the tax, fee, or monetary contribution plus interest of 6% per annum.  The act applies to actions filed on or after its effective date. 

Infrastructure Funding— As discussed under 2007 Budget Overview above, cities did not get a share of newly authorized local option sales or land transfer taxes for their infrastructure needs.  Bond bills were proposed for a number of infrastructure purposes; including water and sewer, open space land acquisition, affordable housing, and schools, but none of the bills advanced.  In the state budget, HB 1473 (SL 2007-323) , $100 million was appropriated to the Rural Economic Development Center for water and sewer grants, and $120 million in certificates of participation funding was authorized for acquisition of state park lands, conservation areas, and land for waterfront access.  The Clean Water Management Trust Fund was fully funded at $100 million in each fiscal year of the biennium.  The budget also allocates funds for certain named water resources development projects, and provides the state match for federal safe drinking water funds.

Local Option Taxes— Although the legislation was not enacted, we thank Rep. Jennifer Weiss for introducing HB 1982 – Local Option Land Transfer Tax , which would have provided for a 1% land transfer tax and included a municipal share, and Rep. Mickey Michaux for introducing HB 153 – Local Option Tax Menu, providing a menu of local option taxes that could be enacted by cities and counties.

Motor Vehicle Tax— HB 1688 – Amend Combined MV Registration and PT System makes changes to the combined motor vehicle registration renewal and property tax collection system that is slated to go into effect in 2010.  To respond to concerns of automobile dealers, it establishes a limited registration plate system so that dealers do not collect property tax at the point of sale.  The limited plate expires on the last day of the second month following the date of application for the limited registration.  The motor vehicle property tax is due when the limited registration plate expires.  Currently, 60% of the first month's interest collected on unpaid motor vehicle taxes is transferred to the Combined Motor Vehicle and Registration Account in the Office of the State Treasurer, with the funds to be used to develop an integrated computer system for the combined assessment, billing and collection of property taxes and the issuance of registration plates.  The legislation provides that the interest generated by the funds in the account is also credited to the account.  Once the integrated computer system is operational, any funds remaining in the account are to be distributed to local governments on a pro rata basis determined by the amount paid into the account by each local government. 

OPEB — A bill with positive financial implications for local governments, SB 580 – State Treasurer/Local OPEB Investments (SL 2007-384 , was enacted into law this session.  The act establishes the Local Government Other Post-Employment Benefits 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 and provides similar authority for the law enforcement officers' Special Separation Allowance. 

The bill was a top priority of the League and was strongly supported by municipal finance officers.  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.

 Property Tax— Property tax relief was an issue on many legislators' minds this session.  Numerous proposals were introduced but ultimately HB 1499 – Property Tax and PUV Changes and Studies was the one that passed.  It increases the benefit of the property tax homestead exclusion by raising both the income eligibility limit and the amount excluded from taxation to $25,000.  The bill authorizes the Revenue Laws Study Committee to study whether and how to index the minimum amount that is excluded from tax.  The bill also provides for a property tax deferral benefit for North Carolina residents who have owned and occupied property located in the state as a permanent residence for at least five years and are either 65 years of age or older or totally and permanently disabled.  The amount of taxes deferred would be based upon the income eligibility limit of the property tax homestead exclusion.  Under this “circuit breaker” system, an owner who met the eligibility requirements and made less than the income eligibility limit could elect to defer the portion of taxes imposed on the permanent residence that exceeds 4% of the owner's income.  An owner who met the requirements of the circuit breaker benefit and made between the income eligibility limit and one and one-half times the income eligibility limit could elect to defer the portion of taxes imposed on the permanent residence that exceeds 5% of the owner's income.  

Taxes deferred via the circuit breaker benefit would accrue interest and become a lien on the real property of the taxpayer.  The general rule is that these deferred taxes would be carried forward until the death of the owner or until the owner transfers the property, at which time the amount of taxes for that year with no circuit breaker benefit plus those taxes deferred for the preceding three fiscal years, together with interest, would become due and payable within nine months after the date of death or transfer.  An exception to this rule allows the deferral to continue when the residence is transferred to the owner's spouse, if the spouse qualifies for the circuit breaker benefit, occupies the property as a permanent residence, and elects to continue deferral.

If the owner ceases to use the property as a permanent residence for a reason other than a temporary absence for reasons of health or an extended absence while confined to a rest home or nursing home while the residence remains either unoccupied or occupied by the owner's spouse or other dependent, the owner loses the benefit of the circuit breaker, and the deferred taxes become due and payable at the same time the tax levied on the residence in that year is due.  If the owner fails to qualify for the circuit breaker benefit for a taxable year but continues using the property as a permanent residence, no deferral is allowed for that year but deferred taxes from earlier years do not become due.  The circuit breaker provisions are effective July 1, 2009.

Finally, the bill modifies the present-use value requirements for agricultural land used as an aquatic species farm and authorizes the Revenue Laws Study Committee to study various modifications and expansions to the present-use value system.

 SB 646 – Enact Waterfront Access Study Commission Recommendations provides a special use value classification system for “working waterfront property” similar to the current agricultural present use value system.  Working waterfront property is described as property that has, for the most recent three-year period, produced an average gross income of at least $1,000 and is either a pier that extends into coastal fishing waters and limits access to those who pay a fee or is land that is adjacent to coastal fishing waters and is primarily used for a commercial fishing operation or fish processing, including adjacent land that is under improvements used for one of these purposes.  Another proposal on present use value, HB 1889 – Present Use Value System Modifications , was not enacted but it passed the House and will be eligible in 2008.  It would classify wildlife conservation land as property that must be appraised at present use value.

A modified version of the low-income housing builders' property tax exemption unexpectedly s urfaced in the waning hours of the session.  After a floor amendment in the Senate, SB 1309 – Fairness in PT Values/Lien on Mobile Home creates a special class of property under the state constitution which is to be appraised as provided.  If the real property is subject to restriction on the income eligibility of tenants or on rents that may be charged under a state or federal program that provides tax incentives, grants, interest subsidies or loans, the effect of rent restrictions and income restrictions on the true value of the property must be taken into account for purposes of valuation.  In addition, the value of the tax incentives, grants, interest subsidies, or loans provided to the property must be ignored for purposes of valuation.  The bill also provides for reappraisals every four years rather than every eight.  The bill passed the Senate and was in House Finance when the session ended.

Sales Tax— Please see 2007 Budget Overview above for discussion of the “sales tax swap” and municipal hold harmless provisions.  In other legislation affecting sales tax, HB 257 – Streamlined Sales Tax Changes (SL 2007-244) made two definitional changes in state law to comply with the latest amendments to the national Streamlined Sales Tax Agreement.  One change is to add a definition of “bundled transaction” and specify how these transactions are to be taxed.  The other change is to modify the definition of “sales price” to clarify how third-party discounts, such as a manufacturer's coupon, affect the sales price of an item.  The act also makes several other conforming and technical changes in the sales tax laws, as recommended by the Department of Revenue.  None of the changes should materially impact local sales tax revenues.

General Government

Apartment Solid Waste Collection— Companion bills to requires cities and counties to provide a “reasonably equitable” level of service to all single-family and multi-family dwellings did not advance from committee and do not appear to be eligible in the short session.  Under HB 1229 – County/City Solid Waste Collection and SB 1133 - County/City Solid Waste Collection , if the local government funded the service through the property tax, it could not charge multi-family dwellings any additional fees for services not also charged to single-family dwellings.  The League opposed these proposals.

Appointment Reporting —Revisions to the requirements for reporting the gender of individuals appointed to boards and commissions clarify which local appointments are subject to the reporting requirement.  HB 824 – Improve Gender Equity Reporting Statute (SL 2007-167) now specifically lists those local government boards for which a report is necessary.  Forms for reporting are available online and are due to the Department of the Secretary of State on or before September 1 each year. Our thanks to Secretary of State Elaine Marshall for her assistance on this matter.

Bidding Laws— HB 73 – Improve State Construction Process includes a provision that raises the formal bidding threshold on construction or repair projects to $500,000 (previously $300,000).  SB 320 – Statewide Certification of HUBS (SL 2007-392) directs the Secretary of Administration to develop and administer a statewide uniform program for the certification of a historically underutilized business for use by state agencies and local governments and create and maintain a database of the businesses certified.  It requires state agencies and local governments to use only the historically underutilized businesses listed in the database for minority business purposes in the bidding process.  SB 492 – Political Subdivisions/Contracts Exemptions (SL 2007-94) exempts from the bidding laws purchases of supplies or equipment from contracts established by the federal government, if the contractor is willing to extend the same or more favorable prices, terms and conditions as under the federal contract. 

Building Inspections/Permits— Industrial equipment was exempted from the building code in SB 490 – Industrial Machinery-Building Code .  If an electrical inspector has concerns about the safety of a piece of industrial machinery, the inspector may refer the matter to the OSHA Division of the NC Department of Labor but may not withhold the certificate of occupancy or mandate third-party testing of the machinery.  A clarification of the certification of inspectors appears in HB 700 – Standards for Code Enforcement Officials (SL 2007-120).  The act provides that the qualifications board is to issue a standard certificate for each of the following types of building code enforcement officials:  building inspector, electrical inspector, mechanical inspector, plumbing inspector, fire inspector.  One individual may hold more than one certification but may only practice code enforcement within the inspection area and level described on that individual's certificates.  Local governments are authorized to reduce or rebate building permit fees as a means of encouraging sustainable building techniques under SB 581 – Building Permit Reductions/Rebates (SL 2007-381).

 Construction Plan Review— HB 735 – Construction Plan Review (SL 2007-303) increases the threshold size of public buildings whose plans must be approved by the Commissioner of Insurance.  It provides that plans for buildings comprising 20,000 square feet or more for the use of any county, city, or school district must be approved by the Commissioner as to fire safety (was 10,000 square feet).  The act applies to plans submitted to the Commissioner for approval on or after October 1, 2007.

Disposition of Property— Cities were granted additional authority with regard to the donation of surplus property in HB 1060 – Local Government Surplus Property Donations .  The bill provides that a city may donate surplus personal property to another governmental unit within the United States, to a sister city, or to an incorporated nonprofit organization.  The governing body must post a public notice at least five days before adopting a resolution approving the donation.  This legislation will help to clear up questions of authority that arise whenever a natural disaster strikes in another state or country and local governments wish to donate supplies and equipment.

Electronic Signatures— SB 211 – Electronic Signatures/Public Agencies (SL 2007-119) simply clarifies that public agencies can use, as well as accept, electronic signatures.

Eminent Domain — A bill to amend the state constitution to address eminent domain passed the House and remained in the Senate Ways and Means Committee at the end of the session.  HB 878 – Eminent Domain proposes a constitutional amendment to be placed on the ballot at the next statewide primary or election to prohibit the use of eminent domain for economic development.  It states, in part, that “Public use does not include the taking of property for the purpose of thereafter conveying an interest in the property to a third party for economic development.”

We believe that state law (as amended and clarified last session) adequately addresses the issue by expressly prohibiting the use of eminent domain for general economic development purposes.  The legislature can further tighten and clarify those statutes as needed.  A constitutional amendment, once in place, is very difficult to change in order to correct any ambiguities that are created or unintended consequences that may result. 

Ethics— Two bills were enacted during the last days of the session modifying provisions of the state ethics laws passed in 2006.  HB 1110 – State Government Ethics Act Technical Changes (SL 2007-347) makes technical changes to the State Government Ethics Act, the Legislative Ethics Act and the Lobbying Law.  A second bill, HB 1111 – Clarify State Government Ethics Act (SL 2007-348) makes additional clarifying and policy changes to those same laws.  HB 1111 recognizes that a contract city or county attorney appointed as required by law is deemed a city or county employee when acting on matters pertaining to their offices and public duties for purposes of exemption from the lobbying laws.  A related bill, HB 1737 – Legal Expense Funds (SL 2007-349) regulates legal expense funds of elected officers and provides for disclosure of contributions and expenditures.  SB 659 – Officials Forfeit Pensions for Felonies (SL 2007-179) provides that elected officials who are members of the Local Governmental Employees' Retirement System or any of the state government retirement systems forfeit their pensions upon conviction of a state or federal offense involving public corruption or a felony violation of election laws.

Minimum Housing— Legislation that would limit local authority to inspect housing and address unsafe conditions passed the Senate and remains eligible in 2008.  SB 1507 – Housing Conditions/Inspections would amend the minimum housing and building inspection statutes to eliminate a uthority for periodic inspection programs and require “probable cause” before inspecting.  The League opposed the bill as a serious erosion of local governments' ability to investigate and address dangerous structures, dwellings unfit for human habitation, and abandoned buildings.

Nonresidential Buildings— With enactment of SB 556 – Nonresidential Building/Structure Code (SL 2007-414) , cities and counties now have an additional tool for dealing with dilapidated and deteriorating structures.  The act authorizes local governments to adopt and enforce minimum sanitation and safety standards for nonresidential buildings.  The bill is patterned after the minimum housing code and uses similar procedures for ordering repairs or demolition of dilapidated structures.  This was a priority item on the League's advocacy agenda, and we appreciate Sen. John Kerr's leadership on the bill.  We also thank Reps. Bill Daughtridge and Edith Warren for their assistance on the House side.

Open Meetings— A bill to amend the notice requirements for special and emergency meetings remained in House Local Government I and is not eligible for further consideration.  Among other things, HB 311 – Notice of Special/Emergency Meetings would have required eight days' notice of special meetings (rather than 48 hours) if the only newspaper that has requested notice publishes weekly.

Public Records— Several bills addressing public records issues were enacted this session.  HB 36 – Haz. Materials Task Force Recommendations (SL 2007-107) clarifies that municipal 911 data, and data in a "reverse 911" emergency notification system, is confidential and not a public record.  SB 1546 – Clarify Public Access to Personnel Records specifies that the terms of an public employee's employment contract is a public record.  It clarifies that an employee's “salary” for purposes of the Public Records Act includes pay, benefits, incentives, bonuses, and deferred and all other forms of compensation paid by the employing entity.  HB 1439 – Misdemeanor/Not Produce Public Record did not advance from committee and is not eligible in 2008.  It would have made a records custodian guilty of a Class 2 misdemeanor for failing to allow records to be inspected or promptly furnish copies.

Replacing Officials— Procedures for appointing a temporary replacement for a local elected official called to active military duty are spelled out in HB 671 – Replacing Officials Called to Active Duty .  It allows any elective or appointive county or municipal official to obtain an unpaid leave of absence from the official's duties when he or she enters active duty in the armed forces or the national guard.  It specifies that no vacancy is created by a county or municipal official obtaining a leave of absence under the provisions.  If the official will be on active duty for a period of at least 30 days, a temporary replacement for the official may be appointed by the governing body.  No temporary replacement official may be appointed if the official will be on active duty for a period of less than 30 days.  Temporary replacement officials have all the authority, duties, perquisites, and emoluments of the official temporarily replaced.  The appointee must possess all the qualifications required by law for holding the office.

 Retainage— The amount of funds that a municipality can withhold from periodic payments on a construction contract was the subject of several bills this session, and the League worked on amendments to make SB 1245 – Retainage Payments/Construction Contracts (SL 2007-365) acceptable.  As enacted, the bill prohibits retainage on public construction contracts in which the total project costs are less than $100,000.  For projects above that threshold, it allows cities to retain up to 5% of partial payments until the contract is 50% complete, if the contractor is performing according to contract.  The legislation defines what 50% complete means.  If the project is funded by a federal grant or loan and federal provisions on retainage are different, federal law prevails.  The League was successful in adding a provision to the legislation stating that nothing in the bill prevents a city from withholding payments for unsatisfactory job progress, defective construction not remedied, disputed work, or third-party claims.  The act is effective January 1, 2008 and applies to contracts entered into on or after that date.

Smoking in Public Buildings— Some of local governments' authority to regulate smoking was restored in HB 24 – Smoking in State Gov't Buildings/Prohibition (SL 2007-193).   The legislation will allow municipalities to restrict smoking in buildings owned, leased as lessor, or leased as lessee and occupied by the municipality and any place on a public transportation vehicle owned or leased by the municipality and used by the public.  Under previous law, those local governments that did not have smoking regulations in place by October 15, 1993 were preempted and required to set aside 20% of the interior space of government buildings for smoking areas.  A bill that would have allowed local governments to ban smoking in restaurants and workplaces, HB 259 – Prohibit Smoking in Public and Work Places , failed second reading in the House.

State Land Acquisition — When the state seeks to acquire certain land by purchase or gift, it will be required to notify the county and any municipality in which the land is located.  For purchases or gifts of land with an appraised value of at least $25,000 (other than land for transportation purposes), SB 1167 – Notify County Before State Land Acquisition (SL 2007-396) requires notification to the governing body and the manager, if any, and allows the local governments to provide written comments on the acquisition that will be forwarded to the Governor and Council of State.

Street Closings — A bill to change the procedure for closing a public street passed the House and is eligible in 2008.  HB 469 – Reduce Notice Time/Method for Street Closures would change the type of notice for street and alley closures from publication of a resolution for a total of four weeks to publication of a notice in a paper of general circulation at least three times beginning not more than thirty-five days from the date set for the public hearing.

Personnel

Criminal Record Checks— Local fire chiefs, county fire marshals, and local emergency services directors were added to those who can request criminal histories from the Department of Justice for applicants to paid or volunteer positions under HB 1322 – Fire Chiefs/EMS Director: Crim. Requests.

Police Disciplinary Procedures— The “police officers' bill of rights,” HB 980 – Law Enforcement Officer Discipline , cleared House committee this session but stalled on the House floor.  It was returned to House Judiciary I and is not eligible for consideration in 2008.  Municipal employers must maintain the ability to make basic employment decisions, consistent with the current requirements of state and federal law, and for that reason the League opposed the bill.

 Union-Supported Bills— Legislation on various union-related issues was of concern this session.  HB 1583 – Restore Contract Rights to State/Local would eliminate the current statutory prohibition on collective bargaining by public employee organizations that has been in place since 1959.  It passed one House committee and ended the session in House Appropriations, remaining eligible for further consideration in 2008.  SB 1271 – Firefighter/EMS Payroll Deductions requires employers to make payroll deductions for union dues upon the request of the employee for any firefighter/emergency medical services personnel organization that represents a majority of eligible employees in the employer's department; any law enforcement organization that has at least 2,000 members statewide; and any employee organization or association that has at least 2,000 members statewide, at least 500 of whom are law enforcement officers.  The bill passed the Senate and remains eligible in 2008.   SB 963 – City Firefighters/Overtime Pay also passed the Senate and remains eligible for further consideration.  The bill is an attempt to enact into state law the provisions of the Federal Fair Labor Standards Act that apply to full-time paid firefighters.  We believe the legislation is unnecessary and will only cause confusion.   SB 990 – Workers' Comp/Firefighter Occupational Disease failed to advance and is ineligible for consideration in the short session.  The legislation would have created a special presumption that respiratory disease, hypertension, heart disease, and certain cancers and infectious diseases are occupational diseases for firefighters employed by local governments that are covered by the workers' compensation act.  The League opposed the legislation.

Planning & Zoning

Cell Towers and Radio Antennas ¾ As introduced, SB 831 – Wireless Telecommunications Facilities would have preempted municipal authority to determine where cell towers are located.  After a concerted effort by municipal officials and League staff, the bill that was enacted preserves essential municipal authority.  Local governments may not require information relating to the “business decisions” of wireless companies, but may review public safety, land use or zoning issues addressed in its adopted regulations, including aesthetics, landscaping, land-use based location priorities, structural design, setbacks and fall zones.  Local governments may alson require applicants for new wireless facilities to evaluate the reasonable feasibility of collocating new antennas and equipment on an existing structure within the applicant's search ring.  The bill creates a streamlined permit approval process for collocations of wireless devices.  For those collocations entitled to streamlined processing, local governments must inform applicants within 45 days of whether an application for a collocation is complete.  Decisions on streamlined collocation applications must be issued within 45 days.  Consultants' fees are to be incorporated into a permit or application fee.  The act is effective December 1, 2007.  We thank Sen. David Hoyle, sponsor of the bill, for allowing us the time and opportunity to work out this much-improved version.

HB 1340 – Amateur Radio Antennas (SL 2007-147) requires any city or county ordinance that regulates the placement, screening or height of amateur radio antennas or support structures to reasonably accommodate amateur radio communications and represent the minimum practicable regulation necessary to accomplish its purpose.  This is generally a codification in state law of a Federal Communications Commission ruling.  The act also provides that the ordinance may not restrict antennas or support structures of amateur radio operators to 90 feet or lower unless necessary to achieve a clearly defined health, safety or aesthetic objective.

 Extraterritorial Jurisdiction ¾ Legislation to allow residents of the extraterritorial jurisdiction to vote in municipal elections, HB 261 – ETJ Voting, remained in the House Rules Committee at the end of the session.  Under General Assembly rules, it is not eligible for further consideration in the 2008 short session.

Land Use Appeals ¾ A bill to establish statutory procedures on the appeal of land use decisions passed the Senate and remains eligible in the short session.  SB 212 – Land-Use Permit Appeals would apply to appeals of quasi-judicial decisions when the appeal is to the superior court and in the nature of certiorari.  The bill would set forth rules and procedures regarding standing, intervention, the record on appeal, the scope of review, evidence, and other matters.  It would also specify that quasi-judicial decisions on whether to approve or deny subdivision plats are subject to these rules and procedures.  In the interim between sessions, a committee of municipal attorneys will be reviewing the proposal.

Solar Collectors ¾ SB 670 – Use of Solar Collectors (SL 2007-279) provides that city ordinances, county ordinances, deed restrictions, covenants, and other similar agreements cannot prohibit nor have the effect of prohibiting the installation of solar collectors.  The act permits regulating the location or screening of solar collectors, provided the ordinance does not have the effect of preventing the reasonable use of a solar collector for a detached single-family residence.  The act further permits the prohibition of solar collectors in certain enumerated instances.

State Buildings — SB 1313 – Zoning Near State Capitol requires the consent of the Council of State in order for any zoning ordinance to apply to state-owned buildings within six blocks of the State Capitol.

Public Safety

Court System— The state budget, HB 1473 (SL 2007-323) , includes funding for 58 assistant district attorneys, 14 investigators, 80 victim witness legal assistants, 297 deputy clerks, 42 magistrates, 9 district court judges, 2 special superior court judges, and additional judicial support staff.  Funds are also provided to continue technology modernization and to replace expiring federal grants to support drug treatment court positions.

 Emergency Response— HB 767 – ATV Use for Emergencies authorizes law enforcement officers and fire, rescue, and emergency medical services personnel throughout the state to use motorized all-terrain vehicles on some public highways while acting in the course and scope of their duties.  The person operating the ATV must observe posted speed limits and carry official identification or a badge, and the ATV itself must be equipped with operable front and rear lights and a horn.  The bill also allows other employees of certain named municipalities and counties to operate ATVs, repealing existing local acts on the subject.  The provisions become effective October 1, 2007  HB 1321 – Weight and Size Exemption for Fire Response (SL 2007-290) provides a weight and size exception to federal, state and local agencies transporting overweight and oversized vehicles to respond to forest fires, wildfires, and other emergencies or disasters.  It further authorizes DOT to issue an annual or single trip permit for oversize and overweight commercial vehicles used in emergency response and a special single trip permit for oversize or overweight vehicles or vehicle combinations responding to an emergency event.

Hazardous Materials —The General Assembly enacted additional regulations on commercial facilities that store hazardous waste, based on recommendations of a task force appointed by the Governor after a chemical warehouse fire in Apex resulted in evacuation of surrounding residential areas.  HB 36 – Haz. Materials Task Force Recommendations (SL 2007-107) requires more frequent inspections of facilities that store hazardous materials.  Such facilities would be required to provide information about the types of chemicals in storage, consult with local governments about emergency response plans, provide financial assurance for cleanup should a release occur, do additional monitoring, and provide notification to nearby property owners.  Our thanks to Rep. Jennifer Weiss for her work on this bill.

Missing Persons— A bill to establish a “Silver Alert” system for individuals with dementia (similar to the “Amber Alert” for missing children) contains a provision prohibiting law enforcement agencies from establishing or maintaining a policy that requires a waiting period before accepting a missing person report.  See HB 38 – Silver Alert System/Missing Persons Alert .

 Park Safe Zones —Effective December 1, 2007, SB 8 – Expand Safe Zones/Schools, Parks, Child Centers (SL 2007-375) increases the "safe zones" near child care centers and school grounds regarding illegal drug sales from 300 to 1,000 feet of the property line.  It expands the "safe zone" for public parks to include all public parks, not just those with playgrounds, and increases the distance of those safe zones from 300 to 1,000 feet.

 Police Procedures— A number of bills this session affected law enforcement procedures.  SB 1211 – Require Fingerprinting for DWI/DWLR (SL 2007-370) requires police to fingerprint and photograph anyone charged with impaired driving or driving while license revoked if the revocation was for impaired driving, if the person cannot be identified by a valid form of identification.  A provision of HB 454 – Identity Theft authorizes photographs to be taken of a person who operates a motor vehicle on a street or highway if the person is cited by a law enforcement officer for a motor vehicle moving violation, the person does not produce a valid drivers license upon request, and the officer has a reasonable suspicion concerning the true identity of the person.  The bill specifies how and where photos can be taken and how long they may be retained.  HB 1500 – DNA Evidence/Preserve & Access by Defendant requires police to preserve any physical evidence that is reasonably likely to contain any biological evidence collected in the course of a criminal investigation or prosecution.  Evidence must be preserved in a manner reasonably calculated to prevent contamination or degradation of any biological evidence that might be present, subject to a continuous chain of custody, and securely retained with sufficient official documentation to locate the evidence.  The legislation specifies how long evidence must be kept.  HB 1625 –Eyewitness ID Reform Act specifies procedures that must be followed for conducting both live and photo lineups of suspects.  HB 1626 – Enhance Reliability of Interrogations requires police officers conducting a custodial interrogation in a homicide investigation to make an electronic recording of the entire interrogation.  HB 1617 – Investigations of Deadly Force (SL 2007-129) provides that anytime a private citizen is killed by a police officer's use of a firearm in the line of duty, the district attorney must, upon request of the citizen's spouse or family, request an SBI investigation of the incident.  HB 1330 – Exempt Law Enforcement From Backseat Belts (SL 2007-289) exempts persons in the custody of a police officer and being transported in the backseat of the law enforcement vehicle from seatbelt requirements.  SB 806 – Increase Hold For Items By Pawnbroker (SL 2007-415) allows the designee of the chief of police to inspect and pickup pawnbroker records and allows for electronic reporting by fax or online if authorized by the chief.

 Pyrotechnics — HB 189 – Pyrotechnics Permits by Cities (SL 2007-38) allows cities to issue permits for fireworks exhibitions in the corporate limits when authorized by the board of county commissioners.

Street Gangs— The state budget, HB 1473 (SL 2007-323) , contains $4.7 million for street gang prevention grants.  HB 274 – Street Gang Prevention Act passed the House and remains eligible for further consideration in 2008.  It defines “criminal street gang” and “criminal gang activity” in the state criminal statutes for the first time, and provides increased punishments for crimes committed as a gang member.  It makes it a felony to be a gang leader or to threaten a person for leaving a gang, and creates a felony offense of discharging a firearm from within an enclosure (drive-by shooting).  The bill allows seizure of property used in or derived from criminal street gang activity.  It would not apply to juveniles under the age of 16.

 Gaining more tools to combat the growing gang problem is a top priority for the League and the Metropolitan Coalition and we will be pushing for passage in 2008.  M ayors, city officials, and police chiefs from throughout the state worked hard on the bill and spent time in Raleigh and in their hometowns meeting with legislators to discuss local gang problems and the need for the legislation.  Without their efforts, the bill would not have gotten as far as it did.  We thank Rep. Mickey Michaux, sponsor of HB 274 , for his work, as well as Sen. Malcolm Graham, sponsor of the similar SB 1358 .

Street Solicitation — SB 942 – Prohibit Restricting Newspaper Distribution passed the Senate and will be eligible for consideration in 2008.  It would prohibit local governments from enacting ordinances that restrict the news media from distributing newspapers while standing on any street, highway or right-of-way.

Traffic Control— A provision of HB 563 – Traffic & Personal Safety Changes/Protests (SL 2007-360) authorizes cities and counties to adopt ordinances regulating the time, place, and manner of gatherings, picket lines, or protests by pedestrians on state roadways and state highways.

Retirement

Death Benefit — SB 720 – Open Enrollment/Contributory Death Benefit (SL 2007-388) directs the Retirement Systems Division of the Department of State Treasurer to allow for an open enrollment period in the contributory death benefit for retired members of LGERS and the state retirement plans.  This open enrollment period begins February 1, 2008, and ends May 31, 2008.  The Retirement Systems Division is to send notice to all retirees who elected not to be covered under this benefit or who failed to make any election at the time of their retirement.  The contribution rate for retirees electing coverage during the open enrollment period is increased by 11.1% of the rate established for retirees who elected coverage when first eligible at retirement.  HB 779 – Increase Contributory Death Benefit raises the amount of the benefit from $9,000 to $10,000.

LGERS Purchase of Service — HB 1025 – Local Government Retirement/Purchase of Service (SL 2007-304) permits an employer to amortize the cost of probationary employment for members of the Local Governmental Employees' Retirement System when it has elected to pay all or a part of that cost .

LGERS Retirement COLAS— The budget bill does not set the retirement cost of living adjustment for the Local Governmental Employees' Retirement System.  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 2.2%.

Police Officer/Firefighter Retirement —As in many previous sessions, a number of bills to provide additional retirement benefits to particular classes of employees, including police officers, firefighters and emergency medical services personnel, were introduced.  These bills would have provided preferential benefits, such as full pension benefits with 25 years of service and separation allowances for firefighters and rescue squad workers:  HB 1114, HB 1433, SB 1142, SB 1238, SB 1409, SB 1444 .  None of these were enacted, but retirement issues remain eligible in the 2008 session.  HB 328 – Flexible Payment/Law Enforcement Separation (SL 2007-69) did not increase the special separation allowance benefit.  It simply provides that the allowance is to be paid in equal installments on the payroll frequency used by the employer (rather than in 12 equal installments on the last day of the month).

Transportation

Infrastructure — The state budget, HB 1473 (SL 2007-323) , appropriates $21 million in each fiscal year for small construction projects and $15 million in each year for rural or small urban highway improvements and related transportation enhancements.  Section 27.12 of the budget also states the intention to phase out the annual $172 million transfer to the General Fund from the Highway Trust Fund.  The Highway Trust Fund construction budget (loops and intra-state system) was lower than the previous years due to decreased revenue estimates for the Highway Trust Fund.

 There is considerable “buzz” about the potential for a Special Session of the General Assembly for transportation issues.  Whether a special session is called (either by the Governor or the required 2/3 majority of legislators), or a “special commission” is appointed, there is near universal agreement that transportation needs were not adequately addressed in this last session.  The challenge now will be to ensure municipal transportation needs are well-defined and a central part of whatever public dialogue or deliberations do take place.

Private Roads — HB 976 – Public Vehicular Areas Defined adds gated community roads to the definition of public vehicular areas for purposes of North Carolina law and clarifies that emergency service vehicles are to be granted immediate access to such roads.

Street Construction/Maintenance Responsibility — A major departure from the past appears in SB 1513 – County Transportation Financing and Municipal Powell Bill , which allows counties to participate in financing, acquire land, use eminent domain and make improvements to the state highway system (not municipal systems).  Heretofore, counties did not have general authority to participate in transportation programs in North Carolina.  The legislation also allows municipalities, if they choose to do so, to reprogram municipal Powell Bill funds to complete State TIP projects.  HB 1576 – Coordinated Traffic Signals/Reduce Energy Use permits municipalities or MPOs to develop traffic control plans that coordinate traffic lights on state roads that become part of a municipal street system.  This bill passed the House and is eligible in the short session.  SB 373 – Street Construction/Developer Responsibility passed the Senate as a local bill that applies only to Onslow County and the municipalities therein, but it is likely to be made statewide if it advances in the short session.  As written the bill would limit the ability of municipalities to plan for and seek appropriate developer participation in the costs of transportation improvements associated with new developments.  A DOT-backed bill to require municipalities to take responsibility for more streets from the state, HB 1462 – Municipal Street Provisions , did not come up in committee this session and did not advance.

Study— HB 1005 – Various Transportation Changes/Study, passed on the last day of the session, added transportation to the responsibilities of the state's Debt Affordability Advisory Committee and required DOT to present a study to the Joint Legislative Transportation Committee by October 1, 2007 that recommends any legislation for improving transportation, including alternative funding.  It also authorized the State Budget Office to spend $1 million to prepare a “statewide logistics plan” for commerce, transportation, and long term economic growth and to report its findings to the Joint Legislative Transportation Committee by April 1, 2008.

Utilities

Electric Service Territories —Territorial disputes between electric cities and electric membership corporations will be resolved by the NC Utilities Commission under HB 1395 – Electric Suppliers/Electricities Assignment (SL 2007-419) .  To the extent that the parties have been unable to reach agreement by May 31, 2007, the Commission has jurisdiction to resolve all issues related to the negotiations and either party may petition for the exercise of that jurisdiction.  The Commission is to consider public convenience and necessity in reaching its decision but may not consider rate differentials between the city and the electric membership corporation.  Electricities successfully fended off various unfavorable provisions and the League supported their position.

 Liability — Legislation that passed the Senate would help to clarify a water utility's liability for water characteristics that do not violate drinking water standards.   SB 1259 – No Liability/Water Meets Water Standards specifies that the water provider is not deemed to be an insurer of the quality of the water so long as the water meets or exceeds the standards in the state drinking water statutes.  The provider of the water is not deemed to be giving a warranty under the Uniform Commercial Code.  The bill remains eligible for further consideration in 2008.

Renewable Energy — Legislation created a renewable energy and energy efficiency portfolio standard for electric power suppliers, including municipalities.   SB 3 – Promote Renewable Energy/Baseload Generation (SL 2007-397) requires electric cities and electric membership corporations by 2012 to supply at least 3% of their 2011 retail electric power sales through new renewable energy facilities or through savings by implementation of energy efficiency measures.  The percentage increases to 6% of 2014 sales by 2015 and to 10% of 2017 sales for the year 2018 and thereafter.  The electric public utilities must meet a similar schedule but they have an additional requirement to supply at least 12.5% of 2020 sales by the year 2021 and thereafter.  The bill also includes provisions that allow public utilities to recover costs for new nuclear facilities until they are producing energy.

Telecommunications Services— Municipal officials spoke loudly and legislators responded on HB 1587 – Local Government Fair Competition Act .  The bill was designed to keep cities and counties from providing telecommunications services, such as high-speed broadband service.  As originally written, it would have placed significant barriers, including requiring referendum approval before a city could provide communications services such as cable, telephone, electronic voice, data or Internet access.  The League dubbed it a “no competition” bill, and municipal officials kept up a steady stream of contacts with legislators.  Despite backing and heavy lobbying by major telecommunications companies, the bill was turned into a study with a final report not due until the 2009 session.  Although the bill was not enacted and no comprehensive study bill passed, the issue still could be studied by a standing legislative commission.  Our thanks to all the municipal officials who responded to our action alerts on this bill. 

New Towns

The General Assembly passed three incorporation bills this session.  The incorporation of the Town of Butner in Granville County was effective July 27, 2007.  The incorporation of the Town of Eastover in Cumberland County must first be approved under Section 5 of the Voting Rights Act of 1965 by the US Department of Justice and, if so approved, is subject to a referendum to be held within 150 days of the approval.  The incorporation of the Town of Hampstead in Pender County is subject to a referendum to be held on November 6, 2007. 

Studies

 The General Assembly adjourned without enacting a studies bill.  Some studies were authorized in individual bills as reported above.  The Speaker of the House and the Senate President Pro Tem may choose to appoint select committees to study various issues, and some issues could be taken up by ongoing study commissions such as Revenue Laws and Environmental Review.  The League will monitor these studies, provide information, and participate in shaping their recommendations as appropriate.

Looking Ahead to 2008

 The 2008 Session of the General Assembly (the “short” session) will convene at 12:00 noon on Tuesday, May 13, 2008.  As is usually the case in short sessions, matters that may be considered are limited.  The adjournment resolution, SJR 1573 – Adjournment Resolution (Res. 2007-68) , specifies that the following may be considered in the 2008 Session:  bills directly and primarily affecting the state budget; constitutional amendments; bills introduced in 2007 that passed one chamber and were received in the other in accordance with the rules; recommendations of study commissions and certain other named committees; certified non-controversial local bills submitted by the deadlines noted below; appointments to state boards and commissions; matters authorized by joint resolution passed by a two-thirds majority of the members present and voting in each chamber; bills primarily affecting any state or local pension or retirement system; and bills to disapprove administrative rules.  “Blank bills,” those without substantive provisions, are prohibited from introduction in the House.

 Local bills must be submitted to Legislative Bill Drafting by May 21, 2008, and introduced in the House or filed for introduction in the Senate by May 28, 2008.  “Certified non-controversial” means that no public hearing will be required or requested, and the entire legislative delegation representing the local government has approved the local bill for introduction.

Final Thoughts

 The League staff expresses our appreciation to League President Robert Partin, Mayor of Scotland Neck, for his leadership and assistance during this session.  We also thank the other League officers and members of the Board, and the chairs and members of the standing legislative action and technical advisory committees.  These municipal officials provided inspiring leadership and took an active hand in the League's legislative efforts.  The core principles they identified and the two-year advocacy agenda they developed 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 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 in 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 ratified bills or court opinions, consult your attorney, or call us before acting on any information contained in these publications.  Effective dates are important, and some of the bills reported herein have been ratified but not yet signed by the Governor.  (See Note on Status of Legislation above).  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, Anita Watkins, Gregg Schwitzgebel, Lee Mandell, Beau Mills, Charles Archer, 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.