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Legislators Commit to League to Work on Privilege License Revenue

Privilege license changes signed into law this week would cost cities $62 million in revenue beginning next year, but legislators have committed to the League that they will work on securing replacement revenue before these changes go into effect. Governor Pat McCrory signed HB 1050 Omnibus Tax Law Changes into law yesterday, officially placing limits on cities' FY14-15 privilege license before repealing the authority to levy the tax entirely next year. Contained within a wide-ranging tax bill, the reforms to the privilege license statutes set up a $62 million fiscal cliff for cities in FY15-16. McCrory reiterated a commitment, already made to the League by legislators, to work with cities on finding replacement revenue. He said legislators had told him they would work with cities moving forward, before the tax's expiration next year. "In listening to the concerns from mayors across the state, I initiated conversations with Finance (Committee) chairs Rep. Julia Howard and Sen. Bill Rabon," McCrory said in his statement announcing the signing of the bill. "I asked for and received from each of them a commitment that they will work with local governments during the next year to find a resolution that reforms the local tax option and addresses lost revenue, prior to the sunset date." McCrory's statement is consistent with what legislators have told League members and staff, and with similar commitments to work with cities on finding replacement revenue made by Sen. Rabon and Sen. Bob Rucho at a Senate Finance Committee meeting Tuesday night.

In addition to the $62 million fiscal cliff next year, the bill will also impact cities' FY14-15 privilege license collections. The legislation limits the privilege license in FY14-15 to businesses with a physical location inside a city, and it prevents cities from changing their privilege license rates from what they were in FY13-14. League estimates are that this will cost cities at least $8 million statewide and force changes to local budgets that have already been developed and are nearing passage.

As we have been for months, the League will continue working with legislators on ways to address the revenue set to be lost on July 1 next year. In your conversations with legislators please remind them of the commitment to find replacement revenue for the privilege license tax so that cities and towns of all sizes across the state are not faced with the difficult decisions to either raise property taxes or cut services to businesses and residents. More on the bill's passage into law can be found in the Asheville Citizen-Times and News & Observer. Contact: Chris Nida

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Development Rights Provision Restricts Local Decision-Making

In the last ten minutes of its floor debate on SB 734 Regulatory Reform Act of 2014, the Senate introduced a new concept yesterday that would upend current law and practices regarding development rights. Specifically, the amendment would create a new statutory section that granted vested rights in development when a developer applied for a permit. In contrast, current law grants statutory vested rights upon approval of development plans. The League opposes this provision, which would eliminate local officials' ability to preserve the property rights and value of landowners next door to unforeseen proposed land uses. The provision would have the exact opposite effect of its intent. It would stifle growth and economic development by pushing officials to write restrictive development codes in order to prevent unforeseeable circumstances such as incompatible projects. The provision would also seem to grant vested rights to environmental and other development permit requests, and it would apply equally to State agencies that issued development approvals. This idea received a hearing during an interim committee meeting of the Committee on Property Owner Protection and Rights (for explanation, see slides 12-13 of this presentation and read a short article about the concept). Having passed the Senate last night, SB 734 now moves to the House for consideration. Contact: Erin Wynia
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Senate Plans to Pass Budget Shortly After Midnight

The Senate rolled out its version of the state budget on Wednesday night, moved it through committees yesterday, and is scheduled to give it final approval shortly after midnight tonight. State law requires the budget to be approved on two separate calendar days, so as of this writing the plan is to consider it in a Senate session beginning at 4 p.m. today and then take the second required vote shortly after midnight. Much of the attention on the budget has been focused on areas not directly affecting municipal operations, such as teacher pay, changes to the Department of Health and Human Services and Medicaid, and a shift in control of the State Bureau of Investigation. The budget does project total Powell Bill funds for FY2014-15 at $146.3 million, an increase attributable to revised motor fuel tax collection projections. An additional $73.7 million was also allocated to the Strategic Transportation Investments program. The budget also contains funds for additional positions in the Department of Revenue's Local Government Division that would be focused on auditing refund requests. These positions were requested by the Local Government Division and are supported by the League and the N.C. Association of County Commissioners. Other budget provisions that could impact cities and towns include the following:

  • Section 14.14(a)(4), which allocates nearly $1 million to the Department of Environment and Natural Resources for oil and gas testing/sampling in four previously unexplored areas of the state;
  • Section 14.17, which would require local governments to certify that any funds received for water infrastructure "loans and grants" would not be transferred to their general fund;
  • Section 15.3, which attempts to align state agencies' geographic areas in what have come to be known as "Collaboration for Prosperity Zones;"
  • Section 15.10, which would allow a community to use funds from the Rural Infrastructure Authority to demolish buildings; and
  • Section 34.11(a), which establishes a "Pavement Preservation Program" within the N.C. Department of Transportation.

If the Senate passes its budget after midnight tonight as expected, it would then move to the House for consideration. House leadership has said that they expect to consider their version of the budget in committees next week before voting on it the week of June 8. The Senate and House would then go to a conference committee to negotiate a final version of the budget. Contact: Chris Nida

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League Opposes Senate Measure to Revoke Water Supply Approvals

The Senate advanced a measure yesterday that would revoke previously-granted water supply approvals for a water intake project involving Roxboro, Yanceyville, Person County, and Caswell County. The League opposed this measure, included as part of the Senate's regulatory reform package (Section 3.4). Though a floor amendment yesterday narrowed the scope of this provision to one project, in undermining the fully-approved project, the provision set a negative precedent for all future water supply intakes in the state and the economic development projects dependent on them. If allowed to become law, this measure would create permanent uncertainty that these projects would have access to a reliable, fully-approved supply of treated water. The bill now moves to the House for its consideration. Read further explanation of this provision in "Regulatory Reform Provision Jeopardizes Approved Water Supplies." Contact: Erin Wynia
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Chambers Whisk Energy Bill Through Votes, Send to Governor

In a whirlwind of committee and floor votes this week, the House and Senate ratified SB 786 Energy Modernization Act, sending the bill to Governor McCrory for his consideration yesterday. According to this Fayetteville Observer report, the Governor "absolutely" supported the bill, which indicated a swift signature to make the package law. Taking up a Senate-passed bill this week, House members approved few changes to the proposal, whether in committee hearings or during floor debate. Just hours after final approval by the House yesterday, the Senate voted without debate to accept the House's minor amendments and ratify the bill. Of interest to cities and towns, the final version of the bill turned a harmful property tax cap proposal into a study. It also kept intact language that would allow cities' use of planning and zoning ordinances if those ordinances applied generally to all industries throughout a given zoning classification. And finally, once signed into law by the Governor, the bill's provisions would give the N.C. Mining & Energy Commission the necessary authorities it needs to complete its rulemaking package, scheduled next week for final revisions and a vote to send the rules to public hearing. A delay in the legislature's vote would have further delayed this rule package. Contact: Erin Wynia
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Local Bill Would Eliminate Town of Boone's ETJ

A local bill filed on the last day local bills were eligible to be filed would eliminate the extraterritorial jurisdiction (ETJ) authority of the Town of Boone. SB 865 Town of Boone/Extraterritorial Jurisdiction is sponsored by Sen. Dan Soucek and is a repeat of legislation filed in 2012 that passed the Senate but did not advance in the House. League members made addressing some concerns surrounding ETJ authority a top advocacy priority for 2013-14, but the League opposes efforts to eliminate ETJ authority, and to do so on a city-by-city basis. In a statement, Town of Boone mayor Andy Ball said, "The ETJ is an essential planning tool used by small towns across North Carolina to protect property values, to ensure the quality of life for neighborhood residents, and to discourage urban sprawl. The Town of Boone should have the same rights as any other town or city in the state of North Carolina to manage its growth." Read more on this bill in the Watauga Democrat. Contact: Chris Nida
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Join Us Next Wednesday for Town Hall Day

We hope to see you all in Raleigh next Wednesday, June 4 for the League's annual Town Hall Day event. Join us in the morning for a legislative briefing, followed by a day of meeting with your local delegation and other key legislators. The afternoon will include a state agency panel discussion, with special guests Secretary Tony Tata of the NC Department of Transportation and Dr. Patricia Mitchell, Assistant Secretary for Rural Economic Development with the NC Commerce Department. The day will wrap up with a reception to honor legislators and their staff at the NC History Museum. Pre-registration has closed, but you can still register on-site the day of the event. For details, visit the Town Hall Day website. Contact: Cara Bridges
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House Begins Reg Reform Effort, Considers Development Approval Measures

In the same week the Senate advanced its own regulatory reform package, the House Regulatory Reform Committee met Wednesday to debate that chamber's first regulatory reform measures of the session. Drawing exclusively from proposals approved by interim legislative study commissions, the committee made little to no changes and gave favorable reports to the following development approval bills of interest to municipalities:

Contact: Erin Wynia

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Pension Bill Filings Could Carry Significant Implications

Two bills filed this week related to investments managed by the State Treasurer on behalf of the state and local retirement systems have similar concepts but could have very different implications. HB 1209 Retirement Investment Accountability would help ensure accountability and transparency in the Treasurer's Office's investment operations without jeopardizing contracts the department currently has in effect with its private sector partners. The Treasurer's Office supports this bill. HB 1237 Retirement Investment Transparency, which the Treasurer's Office opposes, would require all investment documents to be maintained as public records, which would likely cost the systems billions of dollars in fines and fees under damages clauses in existing system contracts. Because of the potential for grave financial harm to the Local Government Employees Retirement System under this measure, the League also opposes the bill.

Additionally, the North Carolina Department of State Treasurer could receive two new compliance positions under legislation approved by the House Committee on State Personnel on Wednesday. The legislation, HB 1079 Compliance Team Positions: Fraud, Waste and Abuse Prevention, was requested by the Treasurer's Office and will now proceed to the House Appropriations Committee for further approval. Funding for the legislation was also added to the state budget in an amendment during the Senate State Personnel Committee late Thursday. The Treasurer's Office estimates that the new compliance team staff will save the state and local retirement systems a combined $3 million each year by preventing future system liabilities and stopping overpayments. Contact: Whitney Christensen

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State Health Plan Participation Bill Could Harm Municipal Bond Ratings

Local governments would be allowed to decide whether to enroll their employees, retirees, and their dependents into the State Health Plan under HB 1213 Local Governments in State Health Plan, but under a unique qualifier in the bill's second and third sections local governments would only have this option through January 1, 2018. Representatives from the Treasurer's Office have told the League that a municipality's participation in the State Health Plan could have adverse implications on the municipality's bond rating due to sharing of unfunded liabilities. The bill was filed on Tuesday and has been referred to the House Committee on Government. Contact: Whitney Christensen
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Gravel Clarification Provides Tools for Stormwater Enforcement

The House Environment Committee advanced HB 1166 Clarify Gravel Under Stormwater Laws yesterday, clarifying how state laws treated gravel for the purposes of stormwater regulations. The bill matched the recommendation of the interim Environmental Review Commission (ERC), and the committee approved it without changes. During the interim, the ERC conducted an exhaustive study of the topic and recognized that aggregate materials colloquially called "gravel" functioned with varying degrees of perviousness that depended on the material's ability to infiltrate water. As a result of that study, the bill considered this week reversed a 2013 law that declared all aggregate-covered surfaces were pervious, a conclusion not based in science. To research this distinction further, the bill directed N.C. State University to study the infiltration rates of various aggregate surfaces (read previous League coverage). Bill sponsor Rep. Ruth Samuelson stated that the proposal provided state and local regulators the tools to enforce the existing statute correctly. The House calendared this bill for debate Tuesday. Contact: Sarah Collins

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Amendment Restores Local Fertilizer Ordinance Authority

A League-requested floor amendment during the Senate debate on SB 734 Regulatory Reform Act of 2014 yesterday restored local authority to enact fertilizer ordinances that were necessary to comply with state and federal water quality mandates. The amendment modified a proposal that previously would have eliminated all local authority to regulate fertilizers. Cities and towns that are subject to state and federal wastewater, stormwater, and buffer programs and permits must regulate the use and storage of fertilizer, to varying degrees. This amendment allowed that narrow scope of mandated local regulation to continue. The League thanks amendment sponsor Sen. Brent Jackson, bill sponsor and former Greensboro City Council member Sen. Trudy Wade, other Senate supporters, and agriculture stakeholders for working to address concerns cities held with the original provision. Contact: Erin Wynia
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Leased Public Property Bonding Standards Bill Sent to House Floor

The House Judiciary Subcommittee C voted on Wednesday to give approval to legislation that would extend public bonding standards to non-government lessees of publicly owned property, adding one clarifying change to the original legislation. The legislation, HB 1101 Mechanics Liens - Leased Public Property, was recommended in April by the Legislative Research Commission's Committee on Mechanic's Liens in response to concerns that projects by lessees of public property were currently not held to the same performance and payment bond requirements as public bodies were currently held to under statute. The bill was added to Tuesday's House calendar. Contact: Whitney Christensen
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Bill to Regulate Drones Heads to Judiciary Committee

The House Government Committee voted on Thursday to send legislation that would regulate unmanned aircraft use in North Carolina to the House Judiciary Committee. The bill, HB 1099 Unmanned Aircraft Regulation, which the League has covered previously here, would create civil and criminal causes of action for drone misuse and for surveillance of individuals without their consent. The bill would also repeal the 2013 budget provision that currently requires all state and local government drone operations to be approved by the State CIO. Contact: Whitney Christensen