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City Tax Reform Principles and the Grand Negotiation

As part of the six-month 2013-14 Municipal Advocacy Goal-setting process through which the input of all N.C. cities and towns came into play, member cities established League policy on tax reform. At its most basic level, it said that cities would support any tax reform plan that held cities and towns harmless BY JURISDICTION from proposed changes to both the state and local tax codes. No forms of taxation were favored or opposed. Cities simply asked that municipal revenue streams would generate, at a minimum, the same amount of revenues that they generated for each city before tax reform. Up until Tuesday's revised Senate proposal, all existing tax reform packages attempted (in different ways) to protect cities, and for that, municipal elected officials are extremely appreciative. We continue to promote those principles with legislative leadership in both chambers as the session rolls towards its conclusion.

The House tax reform plan is the most protective of city revenues, as it reforms the existing state tax code without requiring cities to levy any additional taxes to keep individual towns whole.  Unfortunately, the Senate tax reform plan, which is on the Senate floor for final approval next Tuesday, will cost cities approximately $160 million annually once fully phased in -- primarily due to the elimination of the food tax, privilege license tax, and sales tax refund for cities. Additionally, the proposed "replacement" revenue source in that plan is out of municipal officials' control -- it relies on counties to levy a new local food tax, which, if imposed, would be shared with cities. How the plan impacts your city can be found here.    

As the House passes its budget and the Senate passes its tax reform plan, both chambers are poised to vote not to concur in the others' work product, setting up a grand negotiation between House and Senate leadership. We expect finance and appropriations matters to be negotiated simultaneously, starting next week. At this point, city issues are clearly still in the mix, and we'll need your support and PRESENCE as the climax of the session draws near, to keep the protection of city revenues front and center. Come work with us next week!


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ACTION ALERT: Defend Your Hometown Revenues Tuesday & Wednesday

The most recent tax reform proposal at the General Assembly cuts over $160 million in municipal revenues. This proposed revenue cut makes it imperative that legislators hear from you face to face about the impact this would have on your hometown. We need you in Raleigh either Tuesday or Wednesday to speak to legislators about the realities of this tax reform proposal and let them know that cities support a tax reform plan that seeks to protect municipal revenues. Plan to arrive at the League offices in Raleigh at 9:15 a.m. for a quick briefing and a day of legislator visits that we will arrange for you. RSVP today with your plans to fight for your hometown. Contact: Jennifer Webb
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ACTION ALERT: Ask House Members to Continue Protecting City Revenues

The Senate voted this week to give preliminary approval to its version of HB 998 Tax Simplification and Reduction Act by a vote of 30-17, largely along party lines. Despite months of discussions between legislators, city elected officials, and League staff to develop a tax reform proposal that protects municipal revenues, the Senate version of the bill would eventually cost cities and towns over $160 million annually at full implementation. By contrast, the version of HB 998 passed by the House is designed to keep municipal revenues from falling as a result of tax reform. "We in the House worked hard to keep local governments whole," said Rep. David Lewis, one of the sponsors of the House tax reform plan, according to WRAL.

Please contact your House members regarding the negative impact of the Senate’s version of HB 998, and ask them to not concur with the Senate version of the bill. The total fiscal impact of the bill on cities – including elimination of the local food tax and local privilege license tax, and a requirement for local governments to pay sales taxes – can be found here. The League has prepared an analysis showing how the Senate version of the bill would affect the revenues of individual cities and towns.

Many municipalities would need to enact significant property tax increases in order to make up for the revenue lost under the Senate's version of HB 998. During the Senate debate on the bill, several members cited these figures and conversations with their city officials about them when expressing their opposition to the bill. 

Senate President Pro Tempore Phil Berger said that municipalities would have two options under the proposal for addressing their lost revenues – either encourage their county to reinstate the 2 percent local sales tax on food under the authority provided to it in the bill, or cut spending. Sen. Berger did say that he was "always open" to discussing additional revenue options for municipalities. League members adopted the expansion of municipal revenue options as an advocacy goal for the 2013-14 biennium. 

 Contact: Karl Knapp


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League Supports House Approved Budget with Hold Harmless Extension

The House passed its version of the State budget (SB 402) this week. The House version contains a one-year extension of the Transitional Hold Harmless dollars for cities and counties. The House budget assumes a smaller revenue loss due to tax reform than the Senate, but contains no actual reform provisions. These are being considered separately in HB 998. The House budget preserves and increases funding for the Rural Center and the Clean Water Management Trust Fund. A comparison of the House and Senate versions of the budget by the League's Governmental Affairs team can be found here. The Senate is not expected to concur with the House changes, and a conference on the budget will be required. The budget conference will be dependent on the results of the conference on the tax reduction legislation to determine the amount of revenue available to spend. Contact: Karl Knapp
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Compromise Bill Requires Durham to Annex, Provide Water/Wastewater

Following a vote by the Durham City Council last week to deny extension of water and wastewater service to the hotly-debated 751 South project near Jordan Lake, the House Committee on Rules, Calendars, and Operations of the House approved SB 315 Municipal Services Tuesday. This bill would require extension of water and wastewater utilities to the project. The bill represented a compromise between Durham Sen. Floyd McKissick and Rep. Tim Moore, the legislator who pushed a different bill last session that attempted to require the city to provide utilities to this particular development. In addition to the utilities extension provisions, the bill approved this week would:

  • Annex the 751 South property as well as another nearby tract in ten years
  • Require the developer to make certain road improvements
  • Allow the City to charge the developer for the cost of installing infrastructure
  • Limit the City to charging twice its in-town water and sewer rate until the property was annexed

The bill's provisions would apply to any qualifying properties statewide that meet the narrow circumstances described in the bill within sixty days of its passage. The bill has been referred to the House Finance Committee. Contact: Erin Wynia


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Bill to Provide City Dollars to License Plate Agencies Advances

As the state "Tag and Tax Together" program is about to go live, DMV contractors are requesting more money to collect property taxes on motor vehicles for local governments through SB 305 DMV Commission Contract Changes. In its revised form, the bill -- approved by the Senate Transportation Committee on Wednesday -- directs approximately $2 million more to license plate agency owners, in addition to the existing $2.5 million they will receive in local government paid transaction fees. The League opposes the bill, as it does not require the tag office DMV contractors to hire any additional workers to provide customer service enhancements in exchange for the supplemental taxpayer money they will receive. Contact: Paul Meyer
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Omnibus Gun Proposal Passes Senate

The Senate approved changes to an omnibus House gun proposal, HB 937 Amend Various Firearm Laws, this week. Most of the Senate debate centered on provisions that would loosen gun restrictions on public school, community college, and university campuses, as well as a new proposal to eliminate a handgun permit requirement. Senators left unchanged a House provision that allowed holders of concealed carry permits to carry their handguns on greenways. The League spoke against this provision during the House debate, pointing out that under the proposed language, the many residential property owners who granted easements to cities for greenway use would have no opportunity to prohibit greenway users from carrying concealed handguns on their private property. The bill also clarifies the definition of "recreational facilities," areas in which cities and towns may prohibit firearms. The bill now returns to the House for a concurrence vote. Contact: Erin Wynia


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Bill to Empower City Nuisance Abatement Advances

Senate Majority Leader Harry Brown is running a bill which bolsters city authority to abate nuisances. By reversing case law which limited city nuisance abatement authority, SB 264 Abate Nuisances/Drug Sales from Stores empowers cities to use nuisance abatement authority when illegal activity is not the "sole purpose of the building or place." If this bill becomes law, it accomplishes a League Municipal Advocacy Goal for the 2013-14 biennium. We thank Sen. Brown for his assistance in improving the quality of life for citizens and businesses located in cities and towns. Contact: Paul Meyer
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Senate Approves Transportation Reform With Some Changes

The Senate gave its initial approval to transportation reform legislation Thursday, voting in favor of a version that was modified in committee this week from the version moving last week. HB 817 Strategic Transportation Investments now makes rail lines spanning two or more counties, and public transportation service spanning two or more counties and serving at least one municipality, eligible for funding in the Regional project tier. Those public transportation expenditures are limited to no more than 10 percent of any distribution region allocation, though. The bill also clarifies that limitations on State funding for bicycle and pedestrian projects does not apply to projects in the State Transportation Improvement Program and scheduled for construction by 2015, but the language could still be read as preventing municipalities from spending Powell Bill funds for bicycle and pedestrian projects unless those funds are being used to match a federal grant. If the Senate again votes in favor of the bill next week, it will return to the House for a concurrence vote. Contact: Paul Meyer
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MPO/RPO Ethics Bill Headed to Governor

The Senate voted to concur with the House's version of SB 411 Ethics Requirements for MPOs/RPOs, sending it to the Governor to be signed into law. The bill would limit ethics requirements for MPOs and RPOs to only voting members of those bodies. Legislation last year extended the ethics provisions to a much wider set of individuals associated with the MPOs and RPOs, and the League has been working ever since to ensure that the law applies only to those with decision-making powers. The League thanks Sens. Kathy Harrington and Bill Rabon for their support in these efforts and for their sponsorship of SB 411. Contact: Paul Meyer
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Bills Affecting Cities Move In Both House, Senate

The House and Senate took action on a number of bills this week that will have some impact on cities and towns. These bills all advanced without modification to the portions of the bill that affect municipalities. The League has been tracking each of the bills below throughout the legislative session. See below for a list of bills the chambers took action on this week, along with details on the action they took and previous League coverage of the bills.