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Cities and Towns in the Spotlight

There has been a great deal of media coverage concerning legislation impacting cities and towns, and rightly so.  Many of the proposals we are seeing either eliminate city authority completely, or are designed to overhaul existing structures upon which cities and towns rely.  Some of these items are part of large reform efforts at the state level, to which cities and towns are connected.  Please continue to stay abreast of what is happening here in the state capital and get involved with your legislators both in Raleigh and in your hometown. 
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ACTION ALERT- Major Reductions Proposed to City Revenues

Senators Clodfelter, Hartsell, Jenkins, and Meredith introduced SB 394 – Lower Tax rates for a Stronger NC Economy yesterday. The bill would eliminate at least $320 million in existing municipal revenue while providing an unspecified amount of new revenue through an expanded sales tax base. The League supports expansion of the sales tax base to include services, but opposes measures that eliminate or reduce municipal taxing authority and state-collected municipal revenues. The bill does not hold cities and towns harmless if the proposed reductions in municipal revenues are not replaced by additional revenues flowing from an expanded sales tax base.

Have direct conversations with your legislators (both House and Senate) as soon as possible to secure their commitment to opposing these reductions in municipal revenues.

The bill would make the following changes that reduce municipal revenues:

  • Reduce the local sales tax on food from 2% to 1% percent effective July 1, 2015, thereby decreasing municipal revenues by over $40 million.
  • Eliminate the State and local franchise taxes on electricity and natural gas, and subject sales of those items to the full state and local sales tax rates. As a result, cities would no longer receive over $200 million in utility franchise tax revenue from those items. While additional revenue would be provided from the sales tax on electricity and natural gas, cities would share those new sales tax revenues with counties. Cities would continue to be prohibited from levying local privilege taxes on companies providing these services. The change would be effective January 1, 2014.
  • Eliminate all State and local business privilege license taxes, including local beer and wine privilege taxes, effective for fiscal years beginning July 1, 2014. Beer and wine permittees would still need to get a local license, but municipalities could only charge a reasonable fee. The loss of privilege license tax authority would reduce municipal revenues by over $60 million.
  • Eliminate the $22 million local distribution from beer and wine excise taxes.

The bill would replace an as-yet undetermined amount of this revenue through the expansion of the state and local sales tax base to include the following:

  • Alteration, repair, maintenance, cleaning, and installation services for any item of personal property that is subject to the sales tax.
  • Entertainment and recreation services.
  • Property care and maintenance services including cleaning, extermination, and landscaping.
  • Security services including, guards, patrols, armored car transportation, remote monitoring of security systems, locksmiths, and vehicle tracking and assistance.

The bill also would eliminate all preferential State sales tax rates, and several tax exemptions, which also would expand the State and local sales tax base. Contact: Karl Knapp

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ACTION ALERT - Municipal Privilege Licenses Threatened

In addition to the tax reform legislation discussed above, this week Senator Andrew Brock (R-Davie) introduced SB 363 Business Tax Reduction and Reforms, which would eliminate the ability of cities to levy privilege license taxes. The elimination would be effective for taxes imposed for fiscal years beginning on or after January 1, 2015, and would cost cities and towns a total of more than $60 million a year in revenue.

To maintain the privilege tax as a source of revenue for your city or town, it is essential that you have direct conversations with your legislators (both House and Senate) as soon as possible to secure their commitment to opposing the elimination of the municipal privilege tax.

Note to your legislators that the League has been proposing measures since 2008 to reduce the complexity and inequity of the privilege license tax and continues to support reform of the current privilege tax structure.  Maintaining the tax as a locally controlled source of revenue is necessary to ensure that cities and towns can provide essential services to businesses and consumers.  Contact: Karl Knapp

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Governor McCory Releases First Budget

Governor Pat McCrory released his proposed budget for the FY 13-15 biennium Wednesday. The proposed budget makes no changes to the structure of state-shared municipal revenues, but does impact several programs that provide funds to municipalities:

  • While the budget makes no changes to the Powell Bill program, declining gas consumption is projected to keep Powell Bill funding flat into FY 13-14 and cause it to decline over the next two years.
  • Also in the transportation area, a two percent reduction to public transportation funding is proposed, following a cut of 9 percent over the last two years. The Small Urban Construction program, which provides $7 million for urban projects on the State system, was proposed for elimination.
  • In the Natural Economic Resources budget, the Clean Water Management Trust Fund, which was reduced from a $100 million appropriation to $10 million over the last two years, is proposed for reduction in FY 13-14 and elimination in FY 14-15. 
  • The Parks and Recreation Trust Fund and Solid Waste Trust Fund, both of which make grants to local governments, would see their funding cut by over half. 
  • The NC Rural Center's funding would be cut by 60 percent.
  • In some positive news, the Main Street Solutions Fund, which supports downtown development in smaller cities and towns, would receive $900,000 in each year of the biennium. 

Contact: Karl Knapp

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Open Records Bills Await Senate Judiciary I Consideration

A pair of open records bills filed last week by Sen. Thom Goolsby have been assigned to the Senate Judiciary I Committee, chaired by Goolsby. SB 331 Sunshine Amendment would place before voters a constitutional amendment declaring a constitutional right to access to public records and meetings not specifically exempted. The amendment would also require a two-thirds vote of the General Assembly for future exemptions to this provision, making it unnecessarily difficult for future legislators to address specific situations related to public records or public meetings in the future. SB 332 Government Transparency Act would establish as public records general descriptions of promotions, demotions, suspensions, etc., and performance evaluations of public employees. Goolsby is also the sponsor of SB 125 Public Meeting/Records Law Violations; read "Senators Raise Concerns Over Criminalization Of Public Records Denials," in last week's LeagueLINC Bulletin, for details on committee discussion of that bill. The League opposes all three bills. Contact: Erin Wynia

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House Hold Harmless Bills Offer Alternate Paths

House members filed two different bills to address the transitional hold harmless issue this week. League members have pressed their legislators in both chambers to introduce legislation on this topic, and we thank the twenty-six House members who signed on to these bills as sponsors -- a strong show of House support for the measures. HB 373 Extend State Hold Harmless Sales Tax Funds is sponsored by a bipartisan groups of representatives: Reps. Winkie Wilkins, Harry Warren, Hugh Blackwell, and Kenneth Waddell. It would extend the payments by two years, through 2014. The second proposal, HB 389 Restore Hold Harmless Sales Tax Funds is sponsored by four members of the House majority: Reps. Bryan Holloway, Julia Howard, Bert Jones, and Justin Burr. It mirrors the provisions of SB 307 Restore Hold Harmless Sales Tax Funds, which provides a partial continuation of the payments for four years by extending full payments in 2013, 75 percent payments in 2014, 50 percent in 2015, and 25 percent in 2016. While the League membership has worked hard to get this legislation introduced, significant opposition remains, especially in the Senate. The legislation will not advance unless officials from cities and towns that have lost this source of funding secure the support of their legislators for the extension. Extension of the transitional hold harmless payment is a League member advocacy goal for the 2013-14 biennium. Contact: Erin Wynia

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House Shoots Down Cities' Ability to Control Residential Aesthetics

The House gave final approval Wednesday to legislation limiting city and town authority to impose design and aesthetic controls on residences within their jurisdiction, following a long debate the day beforeHB 150 Zoning/Design & Aesthetic Controls would eliminate cities' ability to impose aesthetic controls over one- and two-family dwellings in all zoning districts (with limited exceptions), unless these controls are agreed to by the developer typically through pure conditional rezonings. Municipal officials across the state spoke out against the bill, saying it would undermine their ability to provide the neighborhood protections their citizens requested and would stymie their ability to promote economic development by preserving the character of their community. The bill now moves to the Senate for consideration and is expected to move quickly in that chamber. Statewide media reported widely on the House debate earlier this week, including "NC lawmakers want to stop cities' new-home rules," (AP), "NC House OKs limits on residential standards" (News & Observer) and "House OKs limits on cities’ design rules" (WRAL). The Charlotte Observer ran this op-ed Thursday: "Should cities control housing design?" Contact: Paul Meyer

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Local MPO Ethics Bill Introduced

SB 303 MPO Changes (Graham) was introduced late this week to exempt the Mecklenburg-Union Metropolitan Planning Organization from ethics requirements imposed in the 2012-13 State Budget Act. This local bill attempts to cure legitimate concerns revised by the TAC and TCC members across the state over the imposition of new ethics requirements, by simply carving out the Mecklenburg-Union MPO from its application. The bill has been referred to the Senate Rules Committee.  Contact: Paul Meyer
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FEDERAL: Municipal Bonds at Risk, Internet Sales Tax Promising

Congress is poised to take action on two issues of critical importance to municipal budgets – the tax exemption on municipal bonds and sales taxes on Internet purchases. Contact your U.S. Representatives and Senators now and let them know how important these issues are to your finances. On the issue of municipal bond exemptions, Sen. Mark Begich (D-AK) is preparing a letter to President Barack Obama supporting the tax-exempt status of municipal bonds. Ask Senators Richard Burr and Kay Hagan to sign on to that letter when it becomes available. And in the House, Contact your Representatives and ask them to support House Resolution 112 celebrating the importance of municipal bonds. On the issue of Internet sales tax legislation, Senate sponsors are planning to highlight the issue by running an amendment to the FY2014 Budget Resolution this week (and possibly this weekend). Ask Sens. Burr and Hagan to support Sen. Mike Enzi’s (R--WY) amendment regarding the Marketplace Fairness Act. It is critical that the amendment receive 60 votes to show the Senate’s support for this legislation. Read more background on these issues in this LeagueLINC blog post. Contact: Chris Nida

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Town Hall Day is Wednesday!

For the first time in recent years, Town Hall Day will be held in March - March 27, to be exact. Legislation is moving at a rapid pace and this is your opportunity to provide input. Registration opens at 8 a.m. and they day will conclude with a Legislative Reception at the N.C. Museum of History. Join your fellow municipal officials in Raleigh March 27 to let legislators know how their decisions affect North Carolina's cities and towns. On-Site registration is available.


8:00 a.m. 
  Registration Open Quorum Center
9, 10 & 11 a.m.
  NCLM Issue Briefings Identical briefings

1:00 p.m.
  Legislative Leadership
  President Pro Tempore Berger
  Representative Ruth Samuelson

2:00 p.m.
  House & Senate Convene
4:00 p.m.
  "Hot Topics" Issue Updates
  NC Museum of History Auditorium
  Invited Speakers:
  Thomas Stith, Chief of Staff, Governor's Office
  Janet Cowell, State Treasurer
  John Skvarla, Secretary, NCDENR
  Anthony Tata, Secretary, NCDOT
  Susan Kluttz, Secretary, NCDCR

5:30 p.m.
  Legislative Reception
  NC Museum of History

7:00 p.m.
  Reception Concludes