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 August 7 

This week's development

Optional transit tax advances

The Senate has approved HB 148 – Intermodal Transport Bill and this legislation now goes back to the House for concurrence in minor changes. A legislative priority for the N.C. Metropolitan Mayors Coalition and the League, HB 148 authorizes five counties in the Triangle and Triad regions to hold referenda seeking voter approval for a one-half cent local option sales tax for transit. All other counties, except Mecklenburg, could hold a referendum seeking approval for a one-quarter cent local option sales tax. [Mecklenburg County already has a voted one-half cent local option sales tax for transit.]

Clarifications to special separation allowances ratified

HB 816 – Clarify Local Special Separation Allowance has been ratified and signed into law by the Governor. The legislation clarifies that payment of the law enforcement officer special separation allowance ceases upon the death of the law enforcement officer; the last day of the month in which the officer attains 62 years of age; or the first day of reemployment by a local government employer in any capacity. It allows a local government to employ retired officers in a public safety position that does not require participation in the Local Governmental Employees' Retirement System without causing the separation allowance payments to end. We were successful in getting further clarifications so that retroactive payments are not required and pending litigation is not affected.

Authorization for energy loans approved

The House concurred in the Senate version of HB 1389 – Revolving Loan Fund for Energy Improvements this week, and the bill will go to the Governor for her signature. The legislation authorizes a city or county to establish a revolving fund for the purpose of providing loans to finance the purchase and installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to residential, commercial, or other real property. Local governments can use Energy Efficiency and Conservation Block Grant Funds or any unrestricted revenue to fund the revolving loan fund.

Critical infrastructure assessment changes enacted

The General Assembly ratified SB 97 – Critical Infrastructure Assessment Changes this week, which would expand the types of projects for which cities and counties can use revenue bonds and repay them using special assessments as one source financing. Legislation passed in 2008 allowed cities and counties to repay revenue bonds with special assessments for projects involving sanitary sewers, storm sewers, flood control, water systems, public transportation, schools, streets, or sidewalks. SB 97 expands this list to include any type of project for which Project Development Financing may be used under G.S. 105-103, as well as for the installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to residential, commercial, industrial, or other real property. In order for a project to be eligible, a majority of the owners of the assessed property representing 66 percent of the value of the real property to be assessed must petition for the project. The bill also exempts private contractors hired for these assessment projects from some of the competitive bidding requirements if no more than 25 percent of the project is funded by general revenues or general obligation bonds. The bill now goes to Governor Perdue for approval.


Federal Stimulus Spotlight

Federal ARRA compliance webinars

The U.S. Office of Management and Budget, the federal agency tasked with providing guidance to ARRA recipients regarding purchasing, contracting, transparency, and accountability requirements, has produced a series of eight webinars. The webinars will provide information on implementing the guidance set forth in OMB Memorandum M-09-21, released on June 22, 2009. The webinars are available at

Get updated ARRA information

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


Regulatory Items

Drought legislation implementation webinar

The Environmental Finance Center (EFC) produced a webinar this week discussing issues surrounding implementation of the 2008 drought legislation. League staff participated in the webinar and development of its content. You may listen at the EFC website,


General Assembly adopts budget; close of session draws near

Municipal share of beer and wine tax reduced for one year

The House and Senate approved a compromise budget that calls for substantial spending cuts and some $963 million in new or increased taxes. The most significant tax increase is a one-cent increase in the state sales tax, projected to raise approximately $800 million annually. The taxes on cigarettes, beer, wine and liquor will also go up. The budget levies an income tax surcharge on couples with taxable incomes of more than $100,000, as well as a corporate income tax surcharge. Both the sales and the income tax surcharges have a two-year sunset provision.

As part of the revenue package, the General Assembly is reducing the share of beer and wine tax revenues going to cities and counties in 2009-2010. The municipal share, distributed in May 2010, will be reduced by two-thirds, and cities and towns should reduce their expected beer and wine tax revenues by two–thirds for 2009-2010 (current fiscal year) to reflect this reduction. The distribution formula for beer and wine tax revenue distribution will be adjusted for 2010-2011, and the funding level will be restored for the May 2011 distribution.

While we are not pleased that the General Assembly has reduced this important local revenue source, especially after the adoption of 2009-2010 budgets, we do understand the severity of the state's current situation. Other local revenue sources were under discussion for elimination but, in the end, were left in place. The General Assembly did authorize a study on tax reform during the interim between the 2009 and 2010 sessions. Municipal officials need to play an active role in this study, especially since an earlier Senate revenue/tax reform measure proposed to eliminate the local privilege license tax.

With passage of the budget, adjournment of the session is expected in the next few days. There has been a flurry of activity this week, and we will provide a detailed report on the final status of municipal issues in the next few weeks.