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League Bulletin

May 13, 2016

Legislation that would alter the distribution of local sales taxes, and change the sales tax reallocation plan agreed to in last year's budget, was filed this week in advance of the bill filing deadline. SB 846 Change the LOST Adjustment Factor, sponsored by Sen. Harry Brown, would make two significant changes affecting the sales taxes received by local governments. One section of the bill  would eliminate adjustment factors now in local sales tax statutes and instead adjust sales tax distributions based on a county's economic development tier, beginning in 2017. Currently, the one-half cent of local sales tax in Article 40 is distributed to counties based on their population. Before distribution, adjustment factors are applied that increase some counties' share of the sales taxes and decrease others. SB 846 would eliminate individual counties' adjustment factors and instead make consistent adjustments based on whether a county is designated as Tier 1, Tier 2, or Tier 3. For counties like Dare and Brunswick -- and the municipalities in them -- that currently have a high adjustment factor, this could result in sales tax reductions beginning with the next fiscal year. Counties with a lower adjustment factor would likely see an increase in sales tax revenues beginning in Fiscal Year 2017-18.

The second section of the bill eliminates $17.6 million in state funds that were set to be contributed to local sales taxes to help ensure no counties or cities lost money as a result of sales tax reallocation that was agreed to last year. Under that plan, $84.8 million was to be allocated to 79 counties based on percentages listed in statute beginning in Fiscal Year 2016-17. Of that $84.8 million, $67.2 million was projected to come from expansion of the sales tax base. The $17.6 million that is now being proposed for elimination was to help fund the remainder of the reallocation. Under SB 846, the $17.6 million contribution would be eliminated as of July 1, 2016, causing revenue uncertainty for cities and counties at a time when many have already prepared their budgets for the coming fiscal year. The only fiscal estimates for the bill currently available show a projected loss of $17.6 million statewide for cities and counties in the coming fiscal year. However, it is also possible that last year's expansion of the sales tax base will bring in more revenue than projected and could help to offset the elimination of this $17.6 million in state funds.

The League is working closely with legislators and legislative staff on this bill and assessing its potential impact. When we have further information to share as to projected local effects of this legislation, we will do so. In the meantime, if you have any questions please feel free to contact League Director of Research & Policy Analysis Chris Nida.

Register now to attend Town Hall Day 2016. Scheduled for June 8, Town Hall Day is the premier opportunity for League members to visit legislators and make known their views on issues important to municipalities. It represents the best chance to show strength in numbers and draw attention to the many serious legislative issues facing cities and towns.

For those already planning to attend, now is the time to contact your legislators and make appointments to see them that day. Late morning is likely the best time to schedule those appointments.

Town Hall Day will include:

  • A legislative briefing from the League’s Public and Governmental Affairs Team
  • Meetings with House and Senate leadership
  • Discussions with representatives of state agencies
  • Opportunities to meet individually with legislators from your district, attend committee meetings and observe chamber floor sessions
  • An evening reception with legislators and key state leaders

Nothing can replace the positive impact of in-person conversation on legislators’ votes. More than 400 municipal officials had their say at last year’s Town Hall Day, which generated plenty of media coverage as well. Make sure you don’t miss this year’s opportunity. Click here to register.

Mostly to beat Tuesday's deadline to file budget, finance, and study bills, legislators introduced 132 bills this week. Looking ahead to next week, the Thursday deadline for filing local bills represents the last major opportunity for new bill introductions this session. For this week, bills filed of interest to municipalities include:

  • HB 1051 Solid Waste Amendments: Companion bill to SB 777, which among other technical corrections, clarifies that cities may only grant 60-year franchises for sanitary landfills, and 30-year franchises for solid waste collection or disposal system facilities.
  • HB 1052 Eliminate and Consolidate Reports to ERC: Companion bill to SB 793, which eliminates or consolidates a wide variety of environmental reports, including one requiring local governments to report on the use of internal procedures to elevate disputes with outside consulting engineers.
  • HB 1056 Yadkin Occupancy Tax Modification: Transfers occupancy tax authority within the Town of Yadkinville from the Town to Yadkin County.
  • HB 1058/SB 823 Tobaccoville Recall Elections: Provides a process for voters to petition for removal of the Village's mayor or council members.
  • HB 1059 Prohibit Discriminatory Profiling: Among other provisions, prohibits law enforcement officers from engaging in discriminatory profiling as defined in the bill, and requires local law enforcement agencies to submit information regarding homicide cases to the Department of Public Safety.
  • HB 1069 2016 NC Employee Protection Act: Among other provisions, removes a current exception in state law that allows law enforcement officers, when determining a person's identity or residency, to use a matricula consular card or similar form of identification, or a local government-created ID.
  • HB 1070 Retirement System 4% COLAs: Provides for state and local government retiree cost-of-living increases. Because the proposed COLA for the Local Government Employees Retirement System (LGERS) is higher than the level that could be supported by the investment gains of the system, the change would increase each participating local government's contribution rate for general employees. 
  • HB 1074 Schools Test for Lead/HS Dropout Pilot Prog.: Requires all public schools to test drinking water fountains for lead and remove all sources of lead if tests exceed federal drinking water standards; also directs DEQ and DHHS to study EPA's Lead and Copper Rule, and report findings to legislative oversight committees.
  • HB 1083/SB 860 Wilmington/Ordinance Initiative & Referendum: Clarifies the City of Wilmington's charter so that citizens may petition the city council to pass an ordinance if 25 percent of eligible voters from the previous election present the petition.
  • HB 1086 Refugee Resettlement Act of 2016: Prescribes a procedure by which a city or county board may request, from the state and federal governments, a moratorium on resettlement of refugees in that local government's jurisdiction; requires a public notice and hearing process, as well as documentation of its capacity to settle additional refugees, before a local government board may request additional refugees.
  • HB 1090/SB 826 Prosperity & Econ. Opportunity for All NC Act: Proposes numerous economic development initiatives, including a local economic development consulting service that targets the most-distressed areas of the state with three years' of economic development expertise and leadership development; a $1 million appropriation to the Main Street Solutions Fund; and a revised manner of allocating JDIG funds when a project is located in two different economic development tier areas.
  • HJR 1105 Expand Disabled Veteran Property Tax Benefit: Allows the General Assembly to consider a bill that would expand the homestead property tax exemption for disabled veterans.
  • HB 1106 Modify Uses of Connect NC Bonds: Directs a bond question to be included on the November ballot that asks voters to reallocate $490 million of the previously-approved Connect NC Bond funds from university projects to transportation projects.
  • HB 1121 State Health Plan Admin. Changes: Allows local government units that participated in the State Health Plan as of April 1, 2016, to withdraw from the Plan effective January 1, 2017.
  • SB 820 Appropriations Act of 2016: Blank budget bill.
  • SB 828 Small Business Incentive Act: Adds exemptions from state sales and use taxes for specific categories of tangible personal property.
  • SB 840 Tourism & Marketing Expansion: Appropriates $12 million for the purpose of increasing the NC Department of Commerce's tourism marketing efforts, including its efforts to market to film, sports, and retiree interests.
  • SB 842 Exempt Vacation Linen Rentals from Sales Tax: As the title suggests, adds to a list of exemptions related to the rental of real property.
  • SB 843 Renewable Energy Property Protection: Enlarges current statutory language detailing the state permitting process for wind energy facilities to include renewable energy facilities such as solar installations; establishes pre-application procedures that include listing all relevant local government approvals; requires setbacks for wind and renewable energy facilities of 1.5 miles from adjacent property lines or 2.5 times a wind turbine height from state and municipal road rights-of-way; requires landscaping buffers and screening for solar installations.
  • SB 847 Budget Stability and Continuity Act of 2016: Details the conditions under which state agencies and programs would continue operating in the event that the General Assembly did not pass a budget for the current fiscal year.
  • SB 849 Wake Cty Towns Donate Retired Service Animals: Companion bill to HB 1009, which adds certain Wake County municipalities to the list of local governments that may donate a retired service animal to the local employee who had normal custody and control of the animal during its service.
  • SB 852 Town of Bakersville/Deannexation: Removes one parcel from the town.
  • SB 857 Repeal Light Rail Funding Cap: Companion bill to HB 988, which repeals the $500,000 cap on funding available for light rail projects through the state's data-driven process.
  • SB 865 State Health Plan/Admin Changes/Local Govts: Doubles the limit on number of local government employees and dependents that may participate in the State Health Plan, and like HB 1121, allows local government units that participated in the State Health Plan as of April 1, 2016, to withdraw from the Plan effective January 1, 2017.
  • SB 870 Refine Sales & Use Tax on RMI: Makes numerous additions to current sales and use tax law to clarify circumstances under which the tax would apply to repair, maintenance, or installation services.
  • SB 874 Sanford/Harnett OT: Authorizes occupancy taxes for both the City of Sanford and a district in Harnett County.
  • SB 875 Town of Sunset Beach/Deannexation: Removes several tracts of land from the Town of Sunset Beach.
  • SB 876 Town of Fairmont/Utility Bill Collections: Expands collection remedies for the Town of Fairmont when it seeks to collect unpaid public enterprise fees, allowing the same remedies utilized in collecting delinquent personal or real property taxes; directs the town to establish an appeals process.
In an expected move, lawmakers in both chambers filed a bill this week that would replace the current three-tier system of measuring economic distress with an index. The index would benchmark each county's economic performance, based on four factors listed in the bill, against the state's median performance. Then, the N.C. Department of Commerce would retain exclusive discretion in using the index rankings to determine which counties to allocate funds such as Community Development Block Grant (CDBG), Job Development Investment Grant (JDIG), Main Street, and Rural Infrastructure. In addition, the bill would give the state agency total authority to determine the level of a local match required before a community could receive funds from the Industrial Development Fund Utility Account, CDBG program, and the One North Carolina Fund. This proposal came after months of interim committee debates regarding the next steps for the state to revamp its economic distress measuring tool. Another bill, which would instead set up an interim study process this fall with local government input, was introduced last week. This week's bill, HB 1082/SB 844 Eliminate Use of Development Tiers, came as a recommendation of an interim oversight committee. Contact: Erin Wynia
The House Transportation Committee voted Tuesday to remove a $500,000 cap on light rail projects that became law in last year's budget, with bill proponents stating the removal took political decision-making out of the state's transportation funding decisions. The League supported the committee's vote to advance HB 988/SB 857 Repeal Light Rail Fund Cap and thanks committee co-chairs Reps. Frank Iler and John Torbett, committee vice-chair Becky Carney, and committee members Reps. Bill Brawley, and Nelson Dollar, for their supportive comments. The cap represented the first time the legislature dictated state transportation funding outside the data-driven process approved by lawmakers in 2013. Light rail opponents on the committee advanced other arguments, however, and expressed skepticism of light rail projects in explaining their "no" votes on the bill. The discussion will likely continue during the budget process as the bill travels next to the House Appropriations Committee for further debate and possible incorporation into the state budget. Contact: Erin Wynia

House budget subcommittees convened on Thursday to craft updates to the state’s spending plan and agreed on several provisions for the chamber's final draft. The House and Senate will have to agree on the document’s details before they can send it to the governor for signing, but Thursday's work included House support for:

  • Increased funding to the Community Development Block Grant (CDGB) Program, some of which will provide "training and guidance to local governments relative to the CDBG program, its management, and administration requirements.”
  • Funding for one full-time-equivalent position within the Local Government Commission of the State Treasurer’s Office to consult with local governments on fiscal management, accounting, reporting and other internal control issues.
  • Funding to post the state's building code online.
  • Returning funds from the SolarBee project in Jordan Lake to the Clean Water Management Trust Fund, which can fund water/wastewater/stormwater projects for League members.
  • Funding for a pilot program to alleviate "food deserts," or areas with sparse access to nutritional foods.

The League would especially like to thank legislators for their commitment to continuing the $147.5 million Powel Bill funding level approved last year.

Budget writers in the House and Senate have already agreed on a total spending cap for 2016-17 at $22.225 billion. That's slightly less than the amount that Gov. Pat McCrory proposed in April, but media outlets report that the House plan does include several of the governor's requests, including more funds for tourism marketing. House Rules Chairman David Lewis, in a blogpost, said the House and Senate's spending-level agreement "moves the budget process along much faster than usual because appropriators are starting at the same figure and do not have to negotiate a final number before looking at sub-committee budgets." House lawmakers hope to see a consolidated plan next week.

A Senate bill filed this week would halt road and school funding for municipalities determined to be out of compliance with a new state law banning so-called sanctuary cities. Senate Bill 868, sponsored by Republican Sens. Norman Sanderson of Arapahoe and Buck Newton of Wilson, would establish a process for the attorney general to investigate alleged noncompliance with state immigration laws and would set out consequences. A municipality, county or law enforcement agency determined to be not  complying with the law could lose Powell Bill money and capital funds for schools for at least one fiscal year under the Senate proposal. Read media coverage of the bill here.

A News & Observer report about the bill notes that a separate, immigration-related proposal filed in the House on Tuesday would allow local governments to request moratoria on refugee resettlement and require that they hold public hearings before notifying the state Refugee Assistance Program of their ability to settle additional refugees. The bill would ban local governments from requesting additional refugee settlements until they have documented capacity and held related public hearings.

Another headline week for House Bill 2 included the filing of several lawsuits and direction from the Obama administration that all public school districts nationwide should let transgender students use the bathrooms that fit their gender identity. After word from the U.S. Department of Justice that the new state law and its bathroom restrictions violate the federal Civil Rights Act, Gov. Pat McCrory filed suit against USDOJ. So did Senate President Pro Tem Phil Berger and House Speaker Tim Moore, asking the Eastern District of the federal court to find HB2 is not in violation. USDOJ, whose finding on HB2 could mean the loss of billions of federal dollars for the state, is in turn suing North Carolina over the law. 

The White House, meanwhile, said federal agencies won't block money for the state while the legal proceedings play out, according to the Associated Press. Letters that USDOJ sent the state last week centered on employment discrimination issues related to the bathroom provisions of HB2, requiring individuals in public facilities, including schools, to use only the bathrooms aligned with their biological sex as defined on their birth certificates, as opposed to giving preference based on gender identity. Another lawsuit came from a nonprofit representing public school students and parents who want to prevent the potential loss of federal education dollars per USDOJ’s HB2 finding. The University of North Carolina system is reportedly not enforcing HB2’s bathroom mandate. Meanwhile, House Democrats have filed a bill that would add sexual orientation and gender identity to the state’s list of statuses protected from discrimination. In addition to the bathroom provisions, HB2, signed into law after a one-day special session of the legislature in March, also prohibits local governments from regulating discrimination in places of public accommodation and affects the requirements they can place on contractors.

The Charlotte-Concord-Gastonia and Raleigh metro areas stand out in Forbes’ new, national top-10 list for jobs. Greater Charlotte, ranked eighth in the U.S., experienced just shy of 3 percent job growth last year and saw 16.21 percent growth from 2010 to 2015. Raleigh, ranked ninth, grew nearly 4 percent in 2015 with 17.45 percent growth from 2010. While tech-capital San Francisco topped the list, Forbes pointed out that the Bay Area has felt a “headache” of high housing prices. That’s made for “manna from heaven for upstart metro areas like … Raleigh,” Forbes reported. It noted Raleigh has some of the lowest housing costs among tech centers, and that information sector employment has increased 18.5 percent since 2010 there. Professional business services have increased nearly 28 percent. Forbes said it ranked all 421 metropolitan statistical areas based on jobs data from 2004 to 2015 and whether each was accelerating or slowing. Charlotte and Raleigh also figured highly in a new set rankings that measured the “most frugal” cities in the country. That’s from, which drew from “savings index” data that overall showed consumers used 1.6 billion digital coupons that saved them more than $2.3 billion in packaged goods last year. Charlotte ranked third in the nation for frugality, while Raleigh ranked ninth. Funny enough, the same cities ranked highly in yet another list released this week – for having the most mansions. Click here for more on that.
The state’s top environmental regulatory board met this week to consider a variety of water quality topics of interest to municipalities, including controversial reports that will be sent to the legislature. The N.C. Environmental Management Commission (EMC) also discussed U.S. Environmental Protection Agency’s long awaited partial approval of the EMC’s amendments to state water quality standards -- a rulemaking process known as the "triennial review."

Triennial Review. After almost a full year, the U.S. Environmental Protection Agency responded to the EMC’s submittal of amendments to the state's surface water quality standards. This rulemaking started in 2007 and is required by the federal Clean Water Act. The League was actively involved in the triennial review process because of the impact the standards have on wastewater treatment costs. NCLM supported the EMC’s rulemaking because it reflected a reasonable balance of water quality protection and environmental regulation. In its 50-page response, EPA disapproved some of the League-supported aspects of the suggested standards, including the retention of action levels. The N.C. Department of Environmental Quality (DEQ) is still negotiating with EPA on the EMC’s behalf regarding implementation of the disapproved parts of the amendments and there will be a larger discussion of the effects at the July meeting of the EMC’s Water Quality Committee.

Legislative Reports. The EMC moved forward in approving reports regarding (1) in-lake strategies for mitigating water quality impairments and (2) the benefits of the state’s riparian buffer program, taking action to reject revisions that had been proposed by DEQ that would have removed valuable scientific information. These reports will be submitted to the legislative Environmental Review Commission as required by 2015 legislation.

  • In-lake Nutrient Removal. This report analyzed whether technologies for the in-lake removal of nutrients could address nutrient impairment in lakes which can cause undesirable conditions including algal blooms and fish kills. The EMC recognized that no single in-lake technology or combination of technologies alone appeared to be feasible for restoring water quality on North Carolina’s large bodies of water. Instead, the commission noted that there may be value in using these technologies in combination with other watershed controls, but there is not enough research to guarantee their success.
  • Buffers. In discussion of this report, the EMC recognized that scientific literature demonstrates that riparian buffers perform many functions that protect water quality and address nutrient sediment and pollutant loading as part of larger management strategies that require reductions from municipal and industrial dischargers, and agriculture.

Legislative and regulatory decisions to address nutrient impairment of state waters are important to municipalities because most of the regulatory costs of addressing such impairment falls to municipalities -- which assume a primary responsibility for implementing the requirements of the federal Clean Water Act.

In related news, DEQ decided last week to terminate the controversial SolarBee project on Jordan Lake after 21 months of data indicated there was no significant improvement in water quality from the use of that type of circulator in-lake technology. The project grew from years of legislative frustration over the Jordan Lake Rules, and since the project's inception in 2013, the legislature appropriated over $3 million dollars to it. Although it is likely that the 2016 budget will return any remaining funds designated for the SolarBee project to the Clean Water Management Trust Fund, it remains unclear whether the legislature will continue to delay the implementation of the Jordan Lake Rules. Read media coverage about actions related to the termination of the SolarBee Project here and the report's approved by the EMC here.

The Military Host Cities Coalition, an affiliate of the League, is among organizations supportive of the North Carolina for Military Employment, or NC4ME, summits being held around the state to share how hiring veterans and transitioning service members is beneficial to business. Its next event will be May 18, 9:30 a.m. to noon, at the N.C. National Guard Joint Force Headquarters, 1636 Gold Star Drive, Raleigh. “This FREE event will make the business case for hiring military candidates and identify the resources and strategies that you can use to incorporate military hiring into your business strategy,” the announcement says. Click here for more details and registration. The summit is part of a comprehensive statewide veteran employment solution organized by Gov. Pat McCrory.

The future came into view this week for members of the China Grove Town Council. The Salisbury Post reports that a group of first-graders from China Grove Elementary School on Tuesday presented their municipal leaders a series of model developments that could represent what's in store for the Rowan County town. According to the newspaper, examples included the "Fun For Everyone Mall" and the "All You Can Get Bank and Grocery," planned at specific locations in town. The students' ideas followed lessons learned in class about the town's past, present and where it might be headed. "One goal was for the students to figure out how to make a small town better," the newspaper reported. Read the full story here.