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NCLM News & Political Report

Nearly all the state action affecting local government environmental programs this past month has focused on legislators rather than regulators.

Legislative activity at the N.C. General Assembly has reached its midpoint for the session after a swell of bill filings to meet a key deadline last week. Following that deadline, legislators will finish making their proposals by tomorrow, when any remaining finance and appropriations bills must be introduced by House members. All Senate deadlines passed a few weeks ago.

For the next month, most legislative action will take place in committee meetings. Agendas will be full as legislators push to have their proposals clear at least one chamber before May 16, this year's "crossover" date. All bills that do not make it through at least one full chamber's process by that date may no longer advance.

Leading up to last week's deadline, N.C. lawmakers introduced 1,666 bills, with 1,003 of those proposals coming since last month's edition of EcoLINC. With so much to report, this issue of EcoLINC will provide a rundown of key newly-introduced environmental bills the League is working on behalf of its member cities and towns. In this issue, you will be able to see the most important bills to track this session, based on the substance of the bill as well as political circumstances.

These articles do not, however, include all bills that could potentially affect municipal environmental programs. To provide you the most current information on all of these bills, the League has enhanced its online bill tracking system, available publicly on the League website. This system allows you to see at a glance the tracking status the League has assigned any bill in its tracking system, from "critical" to "high" to "monitor." You may also read League staff-generated summaries of each bill in the system.

Media reports from the past month examine the legislature having difficulty passing sweeping reforms while simultaneously preparing the slew of proposals introduced to date (see "At halfway point, GOP lawmaking slows," from last weekend's News & Observer). Lawmakers also continued to tangle with cities and towns in the last month, as evidenced by numerous statewide media reports:

Within this political context, the League members and staff continue to press the argument that healthy cities and towns are crucial to the state's economic success.

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Water Supply Bills

In the past month, legislators introduced three bills of note that affect municipal water supply operations. To review water supply bills previously introduced this session, read the League's profile in this March 2013 EcoLINC article. Clicking on the bill title will take you to the League's bill tracking service, which includes bill summaries, the League's position and tracking level for the bill, and information on bill status pulled from the N.C. General Assembly website.

  • Mandatory interconnections. Sen. Fletcher Hartsell (Cabarrus) once again introduced a bill that would force interconnections between municipal water and wastewater systems. The League opposes SB 413--Interconnection of Public Water Systems, which would allow the N.C. Department of Environment and Natural Resources to require a system to interconnect with another regional system, as a condition of granting a permit to construct or alter a public water or wastewater system. While the League understands Sen. Hartsell's concern regarding duplicated provision of services in the same service area, League members believe other avenues exist to ensure efficiency of water and wastewater infrastructure at the regional level.
  • Mandatory water efficiency targets. Public water systems would be held to system-wide water efficiency targets, with consumption levels decreasing over time, under SB 513--NC Water Security Act. Under the proposal, most municipal water supply systems would be responsible for water consumption levels of 100 gallons/person/day for residential use by 2018; 75 gallons/person/day for both residential and commercial use by 2025; and 45 gallons/person/day for both residential and commercial use by 2035. The League opposes this bill.
  • Rate flexibility for water/sewer authorities. The state's water and sewer authorities would realize a limited expansion and flexibility of their authority to set rates under HB 788-Water/Sewer Authority/Rate Flexibility. This bill would allow authorities to set flexible rates for water stored by the authority, such as aquifer or surface storage. The League supports this increased rate-setting authority.

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Stormwater Bills

In the past month, legislators introduced six bills of note that affect municipal stormwater operations. To review stormwater bills previously introduced this session, read the League's profile in this March 2013 EcoLINC article. Clicking on the bill title will take you to the League's bill tracking service, which includes bill summaries, the League's position and tracking level for the bill, and information on bill status pulled from the N.C. General Assembly website.

  • Jordan Lake Rules modifications. Two Triad legislators introduced HB 515--Nutrient Management Standards Reform Act, a bill that would further modify the Jordan Lake Rules. These water quality rules, the first of their kind in the state, were implemented by the legislature in 2009 and have been subject to legislative revision every year since then. At the request of numerous cities and towns affected by the nutrient management strategy, this bill would make changes to certain stormwater-related provisions of the rules.
  • Tar-Pam/Neuse buffer program modifications. This year's omnibus regulatory reform bill, SB 612--Regulatory Reform Act of 2013, takes changes enacted with respect to the Tar-Pamlico and Neuse buffer rules further than those put in place by 2012 legislation. Under this proposal, all property is exempt from the buffer rules requirements if it is (1) private property, (2) platted prior to the date the rules went into effect, and (3) complies with all laws in place on the date the rules went into effect. Last year, a similar measure passed into law, though it only applied to residential property and it included setbacks from the buffers for disturbances related to residential construction.
  • Sedimentation & erosion design fast-track permitting. A group of legislators that includes two engineers introduced HB 480--Environmental Permitting Reform, which sets up a fast-track permitting process for certain stormwater and sedimentation/erosion control designs. While the House bill language is also contained in the Senate regulatory reform bill, this proposal will likely be heard first in the House. Modeled after a process the state has long utilized for fast-track design approval of sewer infrastructure, this bill directs a group of experts (listed in the bill) to come up with minimum design criteria (MDC) for various stormwater control devices. That criteria would be adopted into the state's administrative code by the N.C. Environmental Management Commission (EMC). Once part of the administrative code, both the state and locally-delegated programs would issue permits without review of device designs for those designs that fit under the MDC. Future additions to the MDC would also be done via rulemaking with EMC approval. The bill does not alter existing design review processes for devices not included in the MDC, nor does it change a program's ability to inspect those devices after construction begins. The League has requested amendments to the bill to address concerns about being able to hold the engineer responsible for design defects.
  • Falls Lake Rules modifications. A pair of bills introduced by Rep. Winkie Wilkins (Person) would drastically change the implementation of the Falls Lake Rules, causing concerns for the League members who initially agreed to the rules in their current form. HB 729--Uniformity in Application of Falls Lake Rules would require the state to revise its rules so that the strategy's nutrient loading allocations and nutrient management strategies applied equally across the entire watershed. Such a proposal stands in contrast to the Rules' current approach, which allocates nutrient loads based on site-specific analysis. Further, HB 770--Environmental Practicality Act would stall implementation of the Rules while the N.C. Department of Environment and Natural Resources undertook another round of water quality sampling and a study that looks at alternate, less economically impactful, methods of addressing the lake's water quality concerns.
  • Sedimentation & erosion device financial assurance. Developers would be required to provide financial assurance for performance of sedimentation and erosion control devices, under certain circumstances, in HB 779--Financial Assurance for Certain Development. The requirements of the bill apply when a development disturbs more than one subdivided lot, or a single lot with the intent to subdivide that lot. Financial assurance may be provided in any of five different methods described in the bill. The financial assurance may be released when the state or locally-delegated sedimentation and erosion control program determines that sufficient permanent ground cover has been established to prevent erosion of the site, and the site has been closed by that state or local program.
  • Redevelopment option. To assist local governments in encouraging redevelopment in areas with existing hard stormwater infrastructure in place, HB 894--Allocation of Excess Stormwater/Local Govt would allow local governments to determine the capacity of their stormwater pipes to accept additional stormwater flow from sites and then allocate that capacity to redevelopment sites. The bill allows this procedure to substitute for on-site stormwater retention requirements for these redeveloped sites.

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Wastewater Bills

In the past month, legislators introduced three bills of note that affect municipal wastewater operations. Clicking on the bill title will take you to the League's bill tracking service, which includes bill summaries, the League's position and tracking level for the bill, and information on bill status pulled from the N.C. General Assembly website.

  • Land application. County commissioners would have a right to comment on any proposed new land application sites in their county under HB 458/SB 372--Omnibus County Legislation. While not opposed to this specific proposal, the League opposes any grant of authority to local governments such as counties that would give the local government the ability to prevent land application of biosolids. Both state and federal laws provide sufficient environmental protections for the practice, a fact recognized by one of the League's regulatory Municipal Advocacy Goals: "Support legislation that would limit regulation of land application of biosolids to the state and federal governments."
  • Installation of backflow devices. Irrigation contractors would be allowed to install and service backflow prevention assemblies under HB 662--Irrigation K'ors/Install Backflow Assemblies. The bill proposes to modify the definition of an "irrigation system" to remove backflow assemblies from the list of exclusions contained in that definition, thereby opening up the service opportunity for licensed irrigation contractors.
  • Minimum design flow study. HB 856--LRC Study/Minimum Design Daily Flow Rates would direct a legislative study of the minimum design flow rates for wastewater systems. Specifically, the study would recommend whether state rules should be updated so that these designs reflect actual usage and volume under normal use and occupancy situations. Currently, state rules set minimum wastewater flow rates based on a structure's intended uses, such as residential or commercial.

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Utility Operations Bills

In the past month, legislators introduced five bills of note that affect municipal utility operations. To review utility operations bills previously introduced this session, read the League's profile in this March 2013 EcoLINC article. Clicking on the bill title will take you to the League's bill tracking service, which includes bill summaries, the League's position and tracking level for the bill, and information on bill status pulled from the N.C. General Assembly website.

  • Underground Damage Prevention Act rewrite. Legislators introduced HB 476--Rewrite Underground Damage Prevention Act, a comprehensive overhaul of the state's underground digging laws, also known as the "811" laws after the phone number excavators must dial to notify utilities of planned digging activities. This proposal represents the culmination of months of negotiations between representatives of the League, contractors and other excavators, and utilities with underground lines such as natural gas, electricity, and cable. The League supports this compromise legislation, which would require all cities and towns with underground utilities subject to the act to join the NC 811 notification center. However, the bill would exempt cities from the requirement to mark -- or provide a "locate" -- for all gravity-fed wastewater lines installed prior to the law's effective date, and all stormwater facilities.
  • Asheville water system transfer. A bill that would forcibly transfer the Asheville water system to Buncombe MSD, the region's wastewater system, cleared the House yesterday following a long discussion in the House Finance Committee last week about whether the bill would require the forced regionalization of municipal water systems statewide. Sponsors of HB 488--Regionalization of Public Utilities have been adamant that the bill only applies to the City of Asheville, even though it is written as a statewide bill. An important amendment was added to the bill on the House Floor by Rep. Paul Stam (Wake) to further restrict the application of the bill to Asheville only. The League opposes the bill, as the legislature is asserting itself into decisions which are best left in the hands of locally elected officials and boards. The bill now awaits Senate action.
  • Eliminate transfers from water/wastewater utility funds. House members introduced a bill, HB 708--Public Enterprise Systems/Use of Funds, that would assert more legislative control over the finances of local water and wastewater enterprises. This measure would prevent any transfers of funds from these enterprises to other funds within a local government, such as the general fund. Instead, all revenue collected by the enterprise would be required to be spent on the costs of operating the enterprise and associated debt service.
  • Design-build and public-private partnerships allowed for building construction. This statewide bill expands on local bills that would permit local governments to utilize the design-build method of construction for various projects (profiled in last month's edition of EcoLINC). Applying to construction of public buildings, HB 857--Public Contracts/Construction Methods/DB/P3 spells out the terms under which design-build may be used by local governments, including criteria under which a governmental unit would evaluate its capability to manage the project, public notice requirements, firm interview and selection procedures, and performance and payment bond requirements. The bill also sets out requirements and procedures for any project undertaken as a public-private partnership. Those procedures differ from those in HB 887--Public Contracts/Public-Private Partnerships, discussed immediately below. 
  • Allow public-private partnerships. HB 887--Public Contracts/Public-Private Partnerships sets out the procedures under which local governments may enter into contracts with private entities for capital improvement projects. The bill language addresses the following aspects of such arrangements: ownership of land and materials needed for the project, contractual terms, types of public financing that may be applied toward such projects, notice of the project, and selection of private contractors by the public agency.

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Regulatory Reform Bills

In the past month, legislators introduced five regulatory reform bills of note that affect municipal environmental programs. To review regulatory reform bills previously introduced this session, read the League's profile in this March 2013 EcoLINC article. Clicking on the bill title will take you to the League's bill tracking service, which includes bill summaries, the League's position and tracking level for the bill, and information on bill status pulled from the N.C. General Assembly website.

  • 401 certification waivers. Under the terms of a newly introduced bill the N.C. Department of Environment and Natural Resources (DENR) would have one year in which to issue a "401 Certification," named after the section of the federal Clean Water Act requiring DENR to issue a water quality certification for development projects. The certification memorializes the agency's judgment that the development activities will not degrade the state's waters or violate the state's water quality standards. Under SB 391--401 Certification Clarification, if DENR did not issue a 401 certification within one year of an application, the certification will be deemed to be waived and projects would be able to proceed without the certification.
  • Expanded Rules Review Commission authority. The omnibus Senate regulatory reform bill for this session, SB 612--Regulatory Reform Act of 2013, would grant the N.C. Rules Review Commission (RRC) expanded authority to review rules passed by state agencies. Currently, the RRC reviews only rules that are currently proposed by state agencies. If this reform were enacted into law, the RRC would be able to initiate its own review of any rule and evaluate it based on whether it was (1) promulgated under the appropriate authority, (2) clear and unambiguous, or (3) reasonably necessary to implement a state or federal law.
  • Align state agency regional offices. In what promises to be a controversial topic, House members have proposed to realign the boundaries of the state's environment, transportation, and economic development regional offices. HB 356--Customer Srvc., Econ. Dev., and Transport'n would place each county of the state into one of seven regions. The bill would also direct the three affected state agencies (environment, commerce, and transportation) to develop a plan for sharing regional office space, offering one-stop services, and sharing support staff, training, and equipment. Implementation of the plan would start in the second half of this year.
  • Local government regulatory reform. Introduced as a placeholder bill, HB 677--Local Government Regulatory Reform will likely see numerous changes as it progresses through the legislative process. The League will be closely tracking additions to the bill once it begins to receive committee reviews.
  • No fiscal note for rule repeals. As one of this session's regulatory reform proposals, HB 892--No Fiscal Note for Rule Repeal would achieve one of the League's priority regulatory reform goals. The bill eases the process for repeal of unnecessary, unduly burdensome, or inconsistent rules by not requiring a fiscal note when such rules are repealed. Such repeal is required under recent reforms to the state's administrative procedure process.

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President's Budget Boosts EPA at Expense of Infrastructure Funds

The federal budget proposed last week by President Obama seeks to increase overall spending at the U.S. Environmental Protection Agency (EPA) while reducing funding for two key water, wastewater, and stormwater infrastructure funds. Also, by proposing to cap the tax exemptions currently available for municipal bonds, the President's budget proposal hits local governments twice in their ability to maintain water and wastewater infrastructure.

State Revolving Funds Would Suffer

Local governments rely on two primary federal water, wastewater, and stormwater funds -- known as the Drinking Water State Revolving Fund and Clean Water State Revolving Fund (SRF) -- to repair and replace existing hard infrastructure such as water and sewer lines. These funds may also pay for stormwater controls and other utility equipment needs.

After accounting for budget cuts imposed by Congress in March during the sequestration debate, the President's budget would increase total EPA funding by $250 million. However, combined, the SRF funds would see a nationwide reduction of $472.3 million, with nearly $100 million coming out of the drinking water fund and the remaining $372 million coming out of the clean water fund. The proposed cuts to the clean water fund represent an almost 25 percent decrease from the funding levels approved by Congress in its last budget.

These cuts to the nation's leading source of public water and wastewater infrastructure funding continue a trend in recent years toward de-funding these loan programs. With the remaining funding for those programs, the President's budget request offers clues as to the Administration's SRF priorities.

"EPA will work to target SRF assistance to small and underserved communities with limited ability to repay loans," it states. "The Budget will target the funding intended for green infrastructure approaches to storm and wastewater, which will help communities improve water quality while creating green space, mitigating flooding, and enhancing air quality."

Municipal Bond Tax Exemptions Would Be Limited

The President's budget proposal also would cap the amount of tax exemptions available to holders of municipal bonds at 28 percent of their income. Such a cap would increase borrowing costs for cities while bringing an estimated $45 billion in additional federal revenues. Due to the increased borrowing costs that would result from a cap, cities and towns oppose the measure.

For 100 years, municipal bonds have held tax-exempt status, which allows cities to borrow for infrastructure projects like water and wastewater systems at a lower cost. Cities and towns support this partnership with the federal government to provide an efficient financing tool for critical infrastructure, and, in the last decade, they have financed $258 billion in water and wastewater projects nationwide using tax-exempt bonds.

The cap on municipal bonds has been proposed previously. For example, a few years ago, the Simpson-Bowles Commission proposed eliminating the exemption altogether. Read an illustrated background on this tax exemption here.

Tax reforms such as this cap on municipal bond tax exemptions may take place during the current budget debate in Congress.

Budget Proposal's Environment Priorities

If enacted by Congress, the President's budget would place more resources toward the following efforts, among others:

  • Grants to states for water quality programs, including surface water, drinking water, wetlands, and water pollution controls
  • Climate change programs
  • Grants to states for air quality programs, to support EPA's greenhouse gas reporting rule
  • Chesapeake Bay water quality management
  • Electronic reporting, known as the "E-Enterprise" initiative

If Congress cannot agree on a budget by the time the federal fiscal year begins September 1, the President has already issued an Executive Order that would extend the cuts of the sequester through the next budget year.

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Regulatory Briefs

National stormwater groups now believe EPA will delay its much-anticipated national stormwater rulemaking, currently set for release June 10...The MEC has picked up its hydraulic fracturing rulemaking schedule, moving to monthly meetings for the remainder of the year...Also, the MEC will add study groups on two additional topics: coordinated permitting and trade secrets related to hydraulic fracturing...DWQ now estimates that it will not begin a High Rock Lake nutrient management strategy stakeholder process until next year -- sign up for updates on this DWQ website...President Obama's budget requests $60 million to fund an EPA initiative to switch most of the agency's reporting to an electronic reporting system...EPA missed a deadline to promulgate a maximum contaminant level goal for perchlorate due to concerns over the risk method being recommended for the drinking water standard...In addition, EPA has also put the brakes on further regulation of hexavalent chromium in drinking water to allow more time to develop the science that is needed to support additional regulation...Wastewater and stormwater utilities across the country could soon see numeric nutrient permit limits, based on statements by EPA officials discussing an effort underway to write guidance for state permit-writers to incorporate these limits into discharge permits...EPA officially removed its unsupported numeric turbidity limit for construction activities, a move resulting from a settlement with development interests challenging the limit...The public may comment until May 9 on EPA's national water quality assessment, a report that for the first time has integrated in a single document data that could be used to further regulate municipal wastewater and stormwater discharges...A draft rule for hydraulic fracturing water use passed its first MEC committee hearing earlier this month...State regulators told MEC members to expect a BMP manual for landfilling of hydraulic fracturing solid wastes by January.
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