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League Bulletin

May 8, 2015

House transportation leaders presented their most comprehensive proposal to stabilize transportation funding for the long-term to the House Transportation Committee on Tuesday. Sponsored by Reps. John Torbett, Frank Iler, Phil Shepard, and Paul Tine--all of whom also chair the House Appropriations Committee on Transportation--HB 927 Reestablish NC as the "Good Roads State" received mostly positive feedback from committee members. Importantly, two leading House budget writers, Reps. Nelson Dollar and Chuck McGrady, spoke in favor of this proposal. Along with a broad coalition of business and government partners, the League supports efforts to boost transportation dollars. The League does have concerns about HB 927 because it fails to tie Powell Bill dollars to proposed increases on vehicle and other related fees while reducing gas taxes that are tied to local transportation dollars. 

This funding proposal would reduce the gas tax but raise fees such as one paid when vehicles are purchased. Of significance to cities, who count on Powell Bill disbursements to pay for maintenance and other road construction projects on municipal street networks, the bill would hobble future growth of this revenue stream by leaving it tied solely to the gas tax. The State, on the other hand, would see larger increased revenues over time due to the combination of gas tax growth plus growth attributable to the proposed fee increases. The League appreciates Rep. Becky Carney raising this concern during Tuesday's committee discussion, and appreciates the comments by Rep. Torbett made to address concerns over Powell Bill funding. The League also supports the short-term infusion of funding the proposal directs to cities for three fiscal years, to be used for road resurfacing. Because the committee only discussed the bill this week, it will need another hearing and a favorable vote to advance. Contact: Rose Vaughn Williams

The House's omnibus regulatory reform bill, HB 760 Regulatory Reform Act of 2015, passed the House Wednesday and now moves to the Senate. While much of the discussion and amendments related to the state's renewable energy program, changes to riparian buffer rules also became a focus of the debate. The bill sponsor, Rep. Chris Millis, offered an amendment to clarify that the riparian buffer provision did not affect a local governments' ability to use buffers to comply with total maximum daily loads (TMDL) or permits issued by the state, including National Pollutant Discharge Elimination System (NPDES) permits.

While this language is an improvement, Rep. Pricey Harrison noted that it may not address all municipal concerns, citing the League's comments in committee. As amended, this bill would still eliminate local governments' ability to implement stormwater programs that exceed the state's model stormwater ordinance and limit local governments' use of buffers for compliance with water supply watershed requirements or to implement the MS4 program including the post construction requirements.

Other provisions of the bill of interest to municipalities include:

  • Local government regulation of density credits: Requires that a city's zoning ordinance must provide density credits or severable development rights for dedicated rights-of-way.
  • No fiscal note required for less stringent rules: Clarifies that rules adopted pursuant to the Periodic Review of Rules Process do not require a fiscal note if less stringent than the original rule.
  • Communications tower leasing: Allows local governments to lease property for communications towers, facilities, and equipment for up to 25 years.
  • Inspections of building components certified by a licensed professional: Requires local governments' building inspection departments to accept and approve a design certified by a licensed architect or engineer and exempts inspectors from liability.
  • Authority of local governments to expand definition of bedroom: Limits local governments in the adoption of land use planning ordinances from using a definition of bedroom that exceeds any definition of the same in another statute or rule.

The League will continue to work with legislators as the bill is considered by the Senate. Contact: Sarah Collins

Cities across the state are in the final stages of preparing their FY2015-16 budgets, and the pending loss of privilege license revenue is leading to a number of proposals for property tax increases and service cuts. Here are just a handful of examples:

  • In Cary, the town is considering a 3-cent property tax increase, which would be its first such increase in 25 years. One cent of that is specifically to replace lost privilege license revenues of $1.5 million. "We have a service level, a mix of services, that this community demands and that the council wants to deliver to its citizens and that is a substantial hit," said town manager Ben Shivar, according to the News & Observer.
  • Staff in Charlotte are proposing a 1.35 cent property tax rate increase, to be paired with elimination of a garbage collection fee single-family homeowners pay. The Charlotte Observer reported that "the city is struggling to balance its budget in part because the General Assembly repealed the business privilege license tax."
  • Council members in Jacksonville, where lost privilege license tax revenue equated to 2.1 cents on the property tax rate, passed the city's budget Tuesday. The city managed to avoid a property tax increase, but the Jacksonville Daily News reported that "18 functions face expenditure reductions to compensate for the loss of $750,000 in revenue reaped from fees charged for privilege license."
  • The proposed budget in Statesville includes a 5 percent property tax increase. City manager Larry Pressley said in the Charlotte Observer that "The tax hike is needed to replace a loss of $493,000 in revenues. That includes the loss of funds due to the state's repeal of privilege license taxes," which totaled $375,000 in Statesville.
  • And in Washington, the proposed town budget includes a property tax increase of 1.5 cents. In his budget message to the city council, city manager Brian Alligood said, "This recommended tax increase is based solely on the loss of revenue from business privilege licenses that were repealed by the NC General Assembly during its last session," according to the Washington Daily News.

When municipal privilege license authority was repealed last year, legislators and Governor Pat McCrory committed to the League that they would work on a source of replacement revenue before the beginning of the next fiscal year. To date, no such replacement revenue source has been identified. The League -- on behalf of its 540-plus member cities -- continues to push for more municipal revenue flexibility, including the 1/4-cent municipal sales tax option in HB 903 County Tax Flexibility/Municipal Rev Opts. Please continue to talk with your legislators about the importance of this municipal-only sales tax option as a needed way to stabilize municipal revenue sources. Contact: Chris Nida

State government is expected to see a $400 million budget surplus this fiscal year after April tax returns reversed an earlier trend of tax collections lagging behind projections. State budget officials attributed the surge in tax receipts to strong growth in business income and a sharper-than-expected decline in tax refunds. Republicans touted the news as evidence of success of the 2013 state tax reforms; Democrats said it showed more of the tax burden was shifted onto the middle class. 

Much of the $400 million is expected to be used to shore up state government reserves. The revenue growth, though, also translates into new projections for the coming fiscal year that now show legislators with $1.1 billion in additional revenue availability. The news comes as House budget writers met behind closed doors this week ahead of plans to release that chamber's proposed state budget in two weeks. The state spending plan is expected to total about $22 billion. Read media coverage about the budget news here, here and here.

The City of Hickory's plans to spend $40 million on a range of investments in and around its waterfront have gained some national attention. The national digital media news site Route Fifty published this feature story on the plan, which is intended to make the city more attractive to new businesses and young professionals. City voters approved the $40 million bond last fall. The plans include a new walkway corridor along the waterfront, road upgrades and investments in a business park.
The Council of State, which consists of North Carolina's statewide elected officials, this week signed off on a deal that will allow the City of Raleigh to purchase the 300-plus acres that had been home to the Dorthea Dix state psychiatric hospital. The city will pay $52 million for the property, with one-third to be leased back to the state for the state office space already there and the remainder to be turned into a city park. The plans had been in the works for several years, but legislative opposition had stalled them until now. Read media coverage of the deal here.
A nonprofit environmental group is legally challenging a provision of the state's hydraulic fracturing laws that gives the state Mining and Energy Commission the power to determine whether local ordinances illegally restrict the drilling and other activities. The law allows local governments to use zoning authority to limit drilling activity to appropriate areas, but does not allow them to ban hydraulic fracturing. The lawsuit from Clean Water for North Carolina says that the legislature, by giving authority to the Mining and Energy Commission to determine whether a local ordinance has the effect of banning hydraulic fracturing, has violated the separation of powers doctrine. Read media coverage here.