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 June 26 

This week's developments

Deferred property taxes on builder's inventory

A committee substitute for HB 852 – Defer Tax on Builder's Inventory passed the House this week. It creates a property tax deferral (maximum of three years of deferred taxes) on newly constructed homes that are for sale. The deferral applies only to the home – not land, additions, renovations, remodeling, etc. – and the taxes become payable when the home is sold. It is a way to provide relief to builders during the current recession and is supported by House leadership. This proposal was significantly scaled back from attempts in previous sessions to get a tax exemption for homebuilders' inventory. We were successful in obtaining a sunset on the bill and in removing the impact for the upcoming 2009-10 fiscal year.

Budget negotiations continue

House and Senate conferees continue their negotiations on a spending and tax package for the state. With the beginning of a new fiscal year only days away, the Senate passed a continuing resolution to keep state government operating at 85 percent of the current year's budget, to expire when the budget bill passes. The House Appropriations Committee revised the resolution to expire July 15, and the full House will take it up on Monday. Gov. Beverly Perdue continues to push for a higher increase in taxes than either the Senate or House plan so that education programs will not have to be cut as deeply. We are working with legislators and legislative staff to analyze the impact of budget proposals on cities and towns and report to you as developments are known.

Notice of development fee increases

A committee substitute for SB 698 – City/County/Sanitary District Fees/Internet received a favorable report from House Local Government II after a lengthy discussion. As written, the bill would require local governments and sanitary districts to provide notice of the imposition or increase of certain fees, including changes to water and sewer fees, on its website at least seven days before the first regular meeting where the change is discussed. The original purpose of the bill was to provide supplemental notice of development fees, but in its current form it is far too broad. We will continue to work on it as it moves to House Judiciary.

Use of utility poles

The House will vote on a committee substitute for SB 357 – Utilities/Regulation of Pole Attachments , which previously passed the Senate. The bill requires a municipality or cooperatively owned organization to allow any communications service provider (telephone, broadband, cable) to use its poles, ducts and conduits at reasonable, nondiscriminatory and cost-based rates, under terms and conditions pursuant to a negotiated or adjudicated agreement. The committee substitute puts in place procedures for negotiations to take place. If the parties are unable to reach agreement, the matter can be appealed to the Business Court. This compromise version was worked out between Electricities and other stakeholders.

Jordan Lake rules ratified

The House has concurred with the Senate version of HB 239 – Restore Water Quality in Jordan Reservoir , and the legislation now goes to the Governor for approval. It establishes nutrient management rules for the Jordan Lake watershed that are likely to become a template for rules in other areas, according to N.C. Department of Environment and Natural Resources Secretary Dee Freeman, who spoke to the NCLM Board of Directors this week. The new rules will require wastewater treatment upgrades, implementation of the state's buffer program and a phase-in of measures to address storm water runoff from existing development.

Fewer plastic bags on the Outer Banks

The General Assembly has ratified legislation ( SB 1018 – Ban Certain Single Use Bags ) to reduce the use of plastic and non-recycled paper bags on the Outer Banks. Effective September 1, in counties that include barrier islands or a barrier peninsula, retailers may provide only reusable plastic bags except for packaging for fresh meat, fish or poultry products. Recycled paper bags may be substituted for reusable plastic bags.

Authority to set up medical registries for assistance in emergencies

SB 258 – Authorize Voluntary Medical Registry Program has been ratified. The legislation authorizes the Division of Emergency Management may set up a voluntary, model registry for cities and counties to use to identify persons with functional and medical frailties who require assistance during an emergency. Cities and counties may operate similar registries.

Employees on furlough may be considered active for retirement system

The House passed a committee substitute for SB 658 – Modify Supp. Retirement Board/Furloughs this week, authorizing cities and counties to treat employees on furlough as active employees of the Local Governmental Employees Retirement System. A local government employer who chooses to do this would be required to pay both the employer's contribution and the employee's contribution during the furlough. It would be applicable to furloughs on or after January 1, 2009. The bill returns to the Senate for concurrence.

Small town exception contract threshold increased

The General Assembly has ratified legislation amending the conflict-of-interest statute to increase the limit on monetary contracts between a small town and any member of the governing board for provision of goods, services or medically related services ( HB 682 – Adjust Conflict Threshold ). The limit was increased to account for inflation to $20,000 for medically related services and $40,000 for other goods or services within a 12-month period. This exception allowing contracts between a municipality and one of its elected officials applies to cities and towns with population less than 15,000. In addition, the board member must not participate in any way in the vote, the total amount of such contracts must be noted in the audited financial statements, and information about the contracts posted in a conspicuous place and updated at least quarterly.

Seeking changes in bill on appeal of quasi-judicial decisions

Legislation to change the appeals process for rulings of quasi-judicial bodies is under consideration. Many city and county attorneys who deal with land use matters have expressed concerns about this bill. Among the concerns is a provision in the current version of SB 44 – Appeals of Quasi-Judicial Land Use Decisions that removes any discretion to give consideration to the construction given to the local ordinance by the board. The bill is pending before the House Judiciary I Committee.


Federal Stimulus Spotlight

Technical assistance for ARRA grants

The UNC-CH Office of Economic Opportunity has funded nine summer intern positions to provide local governments technical assistance in securing ARRA funding. All interns are graduate students or recent graduates of graduate degree programs at UNC-CH.

One intern is working in the League offices, with the others placed in eight Councils of Government across the state: Land of Sky, Isothermal, Centralina, Piedmont Triad, Triangle J, Upper Coastal Plain, Mid-East, and Cape Fear. The interns are also available to help local governments not directly served by one of the eight COGs. Please contact them for help in identifying funding sources and grant writing.

Get updated ARRA information

The UNC-Chapel Hill School of Government has established a listserv for elected and appointed officials to share ARRA information. To register for the listserv, please visit

For updated information, please visit


Regulatory Update

Water treatment standards and operations proposed rules

The N.C. Department of Environment and Natural Resources has proposed changes to the rules regulating public water systems (15A NCAC 18C). The comment period runs through Tuesday, June 30 . Please submit comments if these proposed rules would adversely affect your operations.

The proposal would incorporate existing treatment standards for cryptosporidium and disinfectants and disinfection byproducts (.2002, .2004, .2006, .2007, .2008). Further, the proposal would increase testing requirements of some systems (.1300).

Find the proposed rules at, pages 2059-2067.

The fiscal analysis is at

Submit comments to Linda Raynor.


Action Items

House Judiciary II Committee approves major changes to annexation statutes

The House Judiciary II Committee late Thursday gave a favorable recommendation to a committee substitute for HB 524 – Annexation – Omnibus Changesthat, if enacted, will make significant changes to the state's annexation laws. The bill is intended to be a compromise that includes provisions from the three major annexation bills (HB 727, HB 645 and HB 524) that were under consideration by the committee.

The bill requires the extension of water and sewer mains as well as lines to individual properties within three years; prohibits the use of shoestring corridors; increases the urban density standards; prohibits the splitting of subdivisions; requires cities to meet a threshold of meaningful services in order to be eligible to undertake city-initiated annexation; requires oversight of the annexation by the Local Government Commission; doubles the time for property owners to pay any assessments in installments and requires installment payments for tap fees; requires cities and towns to annex certain low-income areas; and makes numerous other changes to improve notice and information provided to property owners, allow additional time for challenges, and require the city to study and plan appropriately.

On the whole the committee substitute for HB 524 will make city-initiated annexations more difficult, especially for smaller cities and towns. It includes more protections for property owners and substantially more stringent annexation standards and water and sewer extension requirements. Before adopting the committee substitute, the committee approved three amendments--one technical, one that would make the contiguity standard much more stringent (1/5 instead of current 1/8 of aggregate external boundary must coincide) , and a third requiring the city to prove on appeal that it provides meaningful services (as defined in the bill). Amendments to require a referendum and to require county commissioner approval of annexations w ere defeated. Although we have serious concerns about some of the bill's provisions and its ultimate impact, it does preserve essential municipal annexation authority and does not require a referendum on city-initiated annexations. Like all compromises, it does not make either side happy. Realistically, however, it may be the best hope of getting legislationpassed this session to address annexation issues. As we have said throughout the process, we are committed to reasonable changes to address legitimate concerns.

Our sincere thanks to the members of the House Judiciary II Committee for their thoughtful consideration of this issue. We appreciate the efforts of all those who came to Raleigh to attend committee meetings, contacted their legislators, wrote letters and worked on this issue. This committee vote is just one step in the process, so please continue your work.

Status: The bill now goes to the House Finance Committee, likely to be heard next Thursday, July 2. . Meanwhile, a Senate Finance subcommittee is also considering the annexation issue and all Senate annexation bills are before that subcommittee.
Action Needed: Contact members of the House Finance Committee to ask them to support HB 524 without further amendments. The bill in its current form represents significant change to a law that has served NC well for over 50 years!

Senior Chair: Luebke (919.733.7663, Chairmen: Gibson (919.715.3007, Wainwright (919.733.5995,Weiss (919.715.3010, Vice Chairs: Hill (919.733.5830, Holliman (919.715.0873, Howard (919.733.5904, McComas (919.733.5786, Womble (919.733.5777 Members: K. Alexander (919.733.5778, Blackwood (919.733.2406, Blust (919.733.5781, Braxton (919.715.3017, Carney (919.733.5827, Cotham (919.715.0706, Faison (919.733.5749, Folwell (919.733.5787,
Hall (919.733.5872, Hughes (919.733.5754, Jones (919.733.5825,
Lewis (919.715.3015, McCormick (919.733.5654, McGee (919.733.5747, Owens (733.0010, Rhyne (919.733.5732, Ross (919.733.5773, Setzer (919.733.4948, Stam (919.733.2962, Starnes (919.733.5931, Tillis (919.733.5828


Oppose SB 600 – Condemnation of Conservation Easements
What the bill would do: Currently, this bill places new procedures and standards for condemnation of properties encumbered by conservation easements that will effectively eliminate the ability of cities and towns to condemn such properties. The bill establishes modified procedures for the N.C. Department of Transportation that will enhance the protection of lands covered by conservation easements and we are asking that cities and towns be authorized to condemn property under the same standards as the DOT. The bill in its current form would likely complicate the extension of water and sewer utilities. We are working with stakeholders on this issue to find a workable solution.
Sponsor : Sen. Clodfelter
Status: Passed Senate, bill heard in House Environment Committee 6/18, no vote. Pulled from the 6/23 committee agenda and has not been re-scheduled.
Action Needed: Contact members of the House Environment Committee to ask them to oppose SB 600 unless amended to authorize cities and towns to operate under the same standards and procedures as the DOT.

Chair: Allen (919.733.5860 Vice Chairs: Gillespie (919.733.5862, Harrison (919.733.5771, Justice (919.715.9664, Tarleton (919.733.7727, Underhill (919.733.5853 Members: K. Alexander (919.733.5778, Blackwood (919.733.2406, Floyd (919.733.5959, Gibson (919.715.3007, Haire (919.715.3005, Insko (919.733.7208, Killian (919.733.5886, Luebke (919.733.7663, Martin (919.733.5758, McComas (919.733.5786, McElraft (919.733.6275, Owens (919.733.0010, Samuelson (919.715.3009, Tucker (919.715.3021, West (919.733.5859, Womble (919.733.5777